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Deposit Balances For FDIC-Insured Businesses Down, According to Latest MRI Study
The latest analysis from Market Rates Insight shows that deposit balances in FDIC insured institutions declined for the second consecutive quarter of 2013. In the second quarter of 2013, total domestic-deposit balances declined by $31 billion compared to the first quarter of this year – a decreased of 0.3 percent. Similarly, in the first quarter of 2013, total domestic deposits decreased by about $20 billion or 0.2 percent according to the quarterly report released today by the FDIC.
The decrease in domestic deposit balances comes after six years of continued increase in deposit balances despite a record decrease in deposits interest rates. The decline in deposits rates started in July of 2007, when the national average rate for deposits stood at 3.28 percent. Ever since, the national average rate for deposits continually declined and reached its lowest level of 0.28 percent in July of this year – a decline of 300 basis points or 91 percent in the yield value. During the same time period, July 2007 to July 2013, total domestic deposits balances increased from $6.7 trillion to $9.4 trillion – an increase of $2.7 trillion or 40 percent in six years.
Both deposit categories declined in the second quarter of this year. Certificates of deposit balances declined by nearly $12 billion or 0.7 percent, and total balances of liquid accounts, including checking, savings and money market accounts, declined by about $19 billion or 0.2 percent. However, some types of deposit accounts experienced an increase in balances during the second quarter of this year. Balances of short term CDs of 3-month or less increased by $26 billion or 9.4 percent, and money market account balances increased by nearly $50 billion or 1.1 percent.
“The overall decline in deposits balances in the second quarter of 2013 is an indication that interest rates on deposits are likely to start climbing up in the near future” said Dan Geller, Ph.D. executive vice president at Market Rates Insight, “Financial institutions will need to start increasing interest rates on deposits in order to maintain current deposits levels and to increase liquidity ratio as mandated by Basel III.”
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