Deposit gathering and retention after the US regional banking crisis

Published on February 6, 2023

The bank collapses in early 2023 have exacerbated the issues of deposit outflows, underwater assets, and increased funding costs, particularly for mid-sized and regional banks. How can banks with strong fundamentals ride out the storm to emerge stronger?

US mid-sized and regional banks are contending with a punishing deposit gathering landscape following the collapse of Silicon Valley, Signature, and First Republic banks.

Deposit outflows, which were already rising in 2022 as customers sought out higher yields, accelerated in the first quarter. Outflows were more pronounced from commercial and affluent client segments, compared to retail deposits. Mid-sized banks with assets between $10 billion and $100 billion experienced noticeable outflows, losing 1.9 percent of total deposits in the first quarter of 2023 (chart 1).

Meanwhile, funding costs were higher for regional banks reaching 1.56 percent of total deposits in the first…

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