Deposit Runs

This study examines the dynamics of bank deposit flows in the United States during a period of banking sector uncertainty and rising interest rates following the COVID-19 pandemic. We analyze deposit movements from the first quarter of 2022 through mid-2023, a timeframe that includes the failures of Silicon Valley Bank and Signature Bank. We find that approximately $1 trillion in deposits left the banking system during this period, with outflows particularly pronounced from larger institutions. Results suggest that uninsured deposits exited relatively safer banks, indicating that risk aversion was not the primary driver of these outflows. At the same time, approximately $700 billion flowed into money market funds, with retail investors seeking higher yields in prime retail funds and institutional investors prioritizing liquidity in government funds around the time of the bank failures.