The US Federal Reserve is reporting massive deposit withdrawals from US Banks. The national banking system hasn’t seen such an immense fund outflow since 9/11.
The first week of January 2013 has seen $114 billion withdrawn from 25 of the US’ biggest banks, pushing deposits down to $5.37 trillion, according to the US Fed. Financial analysts suggest it could be down to the Transaction Account Guarantee insurance program coming to an end on December 31 last year and clients moving their money that is no longer insured by the government.
The program was introduced in the wake of the 2008 crisis in order to support the banking system. It provided insurance for around $1.5 trillion in non-interest-bearing accounts with a limit of $250,000. It was aimed at medium and small banks as the creators of the program believed bigger banks would cope with the crisis themselves.
So the current “fast pace” of withdrawal comes as a surprise to financial analysts because the deposits are slipping away from those banks which supposedly were safe. Experts expected savers in small and medium banks would turn to bigger players come December 31.
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