At the onset of the global pandemic in March 2020, the Federal Reserve began to purchase Treasury securities and MBS to support the functioning of financial markets that were exhibiting stress during that time. Source: H.8 statistical release, Federal Reserve Board Bureau of Economic AnalysisĪccessible version The Roles of Credit Line Draws and the Federal Reserve's Asset PurchasesĮarly in the pandemic period, two key factors-the Federal Reserve's policy response to poor market functioning in key securities markets and a spike in commercial and industrial (C&I) credit line drawdowns at banks-contributed to the initial spike in bank deposits. Bank credit includes loans and leases as well as securities holding by commercial banks. Note: Shaded areas indicate recessions as defined by the NBER. Following the onset of the COVID-19 pandemic in 2020, the deposits-to-GDP ratio jumped to over 75 percent and has remained near that level during the pandemic period to date. 3 In the period following the GFC, the deposits-to-GDP ratio further increased to around 60 percent, reflecting, in part an expansion of banks' balance sheets given the expansion of both reserves and credit in the banking system as well as a desire by banks, in light of the new liquidity regulations, to hold more stable forms of funding, including deposit funding. In the years leading up to the Great Financial Crisis (GFC), concurrently with an increase in the ratio of bank credit to GDP (the dashed red line), the ratio of deposits to nominal GDP then steadily increased to around 50 percent. As shown in Figure 3, the ratio of commercial bank deposits to nominal GDP (the black line) hovered around 40 percent from the mid-1970s to the early-1990s, before declining to around 35 percent by 2000, reflecting a trend for commercial banks to fund their growth in loans and securities holdings through other types of liabilities in addition to deposits during that time. What Factors Drove Deposit Growth during the Pandemic?įrom the late 1970s to 2000, bank deposits tended to grow at a somewhat slower pace than that of nominal GDP. In this note, we present evidence that four factors can largely explain the growth in bank deposits over the two year period 2019:Q4 to 2021:Q4: 1) the initial spike in commercial and industrial (C&I) credit line drawdowns at the onset of the pandemic 2) asset purchases by the Federal Reserve 3) large fiscal transfers to households more likely to hold savings in the form of deposits and 4) a higher personal savings rate. Source: Federal Reserve Board Staff calculations Consolidated Reports of Condition and Income, FFIEC 031/041/051.

Factors Affecting Reserve Balances - H.4.1.

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Charge-Off and Delinquency Rates on Loans and Leases at.

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Aggregate Reserves of Depository Institutions and the.

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