Sunday, February 5, 2012

Apparently the Bank Transfer Day was about moving cash TO large banks

Remember this?
AmpedStatus: Together we can ensure that corrupt crony-capitalist banking institutions will ALWAYS remember the 5th of November! If the 99% removes our funds from major banking institutions to non-profit credit unions on or by this date, we will send a clear message to the 1% that conscious consumers won’t support companies with unethical business practices.
And how about this?
Credit Union National Association: At least 650,000 consumers across the nation have joined credit unions in the past four weeks, reflecting consumers' reactions to rising fees at banks, according to a survey by the Credit Union National Association (CUNA).

They have joined credit unions since Sept. 29, when Bank of America (BofA) unveiled its plans to charge $5 a month for debit cards. The public outcry the past month has forced BofA and other big banks to reconsider their debit fees.

CUNA estimates that credit unions have added $4.5 billion in new savings accounts. More than four in every five credit unions experiencing growth since Sept. 29 attributed the growth to consumer reaction to new fees imposed by banks, or a combination of consumer reactions to the new bank fees plus the social media-inspired Bank Transfer Day. Bank Transfer Day, which is tomorrow, urges consumers to switch from big banks to smaller credit unions and community banks.
Now the question is, did it work? Were the large US banks taught a lesson they will never forget? Did droves of depositors move their cash to smaller institutions? The answer may surprise and upset some people. Despite the protests and the grass roots movement to shift deposits to credit unions and local banks, the large US banks increased deposits at over twice the rate of small banks (including credit unions).

Relative growth in deposits (12/29/2010 = 1.00; source: the Fed) 

Overall deposits at US chartered institutions increased materially in 2011. Fears surrounding the situation in the Eurozone forced corporations and individuals out of risky assets and prime money market funds. Those withdrawals were flowing into treasuries and bank deposits. Large US banks increased deposits from the end of 2010 by over 15% (about net $0.65 trillion on an absolute basis). By contrast smaller institutions grew deposits by less than 7% (about net $0.17 trillion on an absolute basis).

Large US banks benefited from redemptions out of prime (excluding treasury and muni) money market funds, who had material exposure to Eurozone banks via dollar commercial paper. The overall assets dropped by 12% (absolute level was net down $0.19 trillion.)

US prime money market funds total assets ($mm; source: ICI)

New cash for large US banks in 2011 also came at the expense of foreign banks (such as ING). The drop was almost 18%, with net withdrawals of $0.19 trillion. The only reason this decline wasn't larger had to do with the fact that Canadian banks did relatively well.

Deposits of foreign banks in the US ($mm; source: the Fed)

Clearly a large portion of these deposits came from corporations instead of individuals. Nevertheless the "dump your large bank" motto just didn't work. Maybe "dump your foreign bank" or "dump your money market fund" would have turned out to be more effective. Apparently talk is cheap and when push came to shove, the bulk of US depositors simply felt safer moving their cash into large US banks.
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