While the US deposit fight that started with the failure of three major US banks in March, has alternated between a bank jog, run and a sprint, depending on whether one uses actual data or the Fed’s politically-mandated seasonal adjustments to deposit outflows…<\/p>\n
… the rest of the “developed world” has so far avoided a similar cascade of bank failures (who knew that injecting trillions in reserves to artificially preserve bank viability would make them beyond brittle and terminally fragile the moment liquidity was withdrawn) and by extensions, a sweeping bank run.<\/p>\n
Or maybe not, because while no other western nation suffered a recent bank crisis as painful as that of the US, it doesn’t mean that other nations are immune to deposit flight.<\/p>\n
Consider the UK, where households just withdrew a record amount from bank accounts last month; and while in lieu of a bank failure panic that would suggest consumers are looking elsewhere for higher interest rates, the reason why deposits are fleeing banks in the US may have a much simpler reason: tapping savings to pay bills.<\/p>\n
As the\u00a0FT reported<\/a>, a net \u00a34.6bn was taken out from banks and building societies in May, the highest level of withdrawals since monthly records began in 1997, according to the Bank of England data published on Thursday.<\/p>\n And since the large net withdrawals from instant-access accounts were\u00a0only partially offset by net inflows into fixed-term accounts, which typically pay higher rates, and individual savings accounts, which offer tax-free dividends and interest on shares or cash, this suggests that the deposit flight wasn’t the result of rate arbitrage.<\/strong><\/p>\n BoE figures showed the effective rate on instant-access accounts dropped 8 basis points to 1.33 per cent in May. That lags considerably both the central bank\u2019s benchmark rate, now at a 15-year high of 5 per cent, and rates for two-year fixed mortgage deals, which are above 6 per cent.<\/p>\n In its latest report, the BoE\u2019s Monetary Policy Committee noted that \u201cthe pass-through [of higher interest rates]\u201d to these accounts had \u201cbeen unusually weak\u201d since it began raising rates in December 2021.<\/p><\/blockquote>\n So if not merely moving deposits from Bank A to Bank B, what’s going on? According to Ashley Webb, UK economist at consultancy Capital Economics, some of the fall to \u201cpeople moving money into other investments outside of the banking sector, such as UK gilts\u201d. But he added:\u00a0\u201cIt\u2019s possible that households\u2019 pandemic savings are being depleted to support spending.\u201d<\/strong><\/p>\n UK households are contending with high inflation, which stood at 8.7% in May, and many have complained that bank savings rates are failing to catch up with the BoE\u2019s rate hikes.\u00a0 Yields on UK 10-year gilts stand at about 4.3%, up from 3.3% in March, while two-year government bonds have a yield of 5.2% up from 3.2% in March, reflecting the changing outlook for interest rates.<\/p>\n Daniel Mahoney, UK economist at Handelsbanken, said the record \u00a34.6bn figure provided\u00a0\u201cstrong evidence\u201d that people were \u201cdipping into excess savings built up during the pandemic to sustain living standards\u201d amid the cost of living squeeze.<\/strong><\/p>\n Read more at: www.zerohedge.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" While the US deposit fight that started with the failure of three major US banks in March, has alternated between a bank jog, run and a sprint, depending on whether one uses actual data or the Fed’s politically-mandated seasonal adjustments to deposit outflows… … the rest of the “developed world” has so far avoided a … Continue reading Soaring UK Inflation Leads To Record Deposit Run<\/span><\/a><\/p>\n","protected":false},"author":6,"featured_media":21342,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[17],"tags":[],"class_list":["post-24341","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-black-horse"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-content\/uploads\/2022\/09\/black_horse_blog-300x100-300x100-1.jpg","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p8fAkI-6kB","_links":{"self":[{"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/posts\/24341","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/comments?post=24341"}],"version-history":[{"count":2,"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/posts\/24341\/revisions"}],"predecessor-version":[{"id":25800,"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/posts\/24341\/revisions\/25800"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/media\/21342"}],"wp:attachment":[{"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/media?parent=24341"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/categories?post=24341"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/setapartbytruth.org\/wordpress-watchman\/wp-json\/wp\/v2\/tags?post=24341"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}