Breaking News: Americans massively withdraw their Bank Deposits in search of Higher Interest Rates

In recent news, three major banks in the US have seen a significant withdrawal of deposits from customers in search of higher interest rates.

In recent news, three major banks in the US have seen a significant withdrawal of deposits from customers in search of higher interest rates. Charles Schwab, State Street, and M&T have reported losses of up to $60 billion in the first quarter of 2023. The withdrawals are said to be caused by the collapse of Silicon Valley Bank (SVB) and two other US banks last month, which has led consumers to put their money into alternative products such as money market funds or Treasury bonds.

This trend of withdrawing from traditional banks is also being fueled by the launch of new savings accounts by technology giant Apple and financial group Goldman Sachs, offering a market-leading interest rate of 4.15% per year. The average US bank savings rate is just 0.37%, and customers have taken advantage of the Federal Reserve (Fed) interest rate hike policy by investing in higher-yield products.

Breaking: Americans massively withdraw their Bank Deposits in search of Higher Interest Rates

Schwab Bank has reported an 11% decrease in deposits, or $41 billion, in the first quarter of 2023, while State Street custodian bank deposits fell 5% to $224 billion. M&T bank also reported a 3% fall in total deposits. These first-quarter earnings reports on deposit flows have signaled a worrisome start to the year for many regional and mid-sized banks.

One of the reasons for the sharp decrease in deposits is the fact that interest rates have risen rapidly. Schwab's retail investors have moved cash out of the country, forcing Schwab to borrow at high interest rates to cover the outflows. While bank deposits have decreased, the size of Schwab's money market fund has grown 150% to $358 billion from $143 billion in the first quarter, up nearly 30% from the end of last year.

The situation has led State Street's shares to close with a 9% decline in New York after quarterly earnings fell short of expectations. The CEO of State Street, Ron O'Hanley, acknowledged the sensitivity of investors due to the volatility of deposits. Schwab, on the other hand, reported better-than-expected profits but halted share buybacks.

Overall, the collapse of SVB and other US banks has had a domino effect on traditional banks, leading customers to withdraw deposits and look for higher-yield products. The launch of new savings accounts with market-leading rates has also drawn customers away from traditional banking, causing regional and mid-sized banks to announce their results and provide a clearer picture of the situation.