# Marketmind: Banks are leaking money
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-27
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: European and Global Markets Outlook from Wayne Cole
Meta Description: Discover the latest updates on European and global markets, including potential bank acquisitions and talks of Federal Reserve actions. Stay informed!
URL: https://financedigest.com/marketmind-banks-are-leaking-moneyhtml

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A look at the day ahead in European and global markets from Wayne Cole

It’s been a quiet Monday so far with Asian share markets mixed but U.S. and European stock futures higher, perhaps because they got through a weekend without another [bank collapsing](https://www.financedigest.com/swiss-regulator-monitoring-banks-and-insurers-after-svb-collapse.html "Swiss regulator monitoring banks and insurers after SVB collapse").

There is some relief that First Citizens BancShares Inc is in advanced talks to acquire [Silicon Valley Bank](https://www.financedigest.com/exclusive-u-s-regulator-seeks-sale-of-silicon-valley-bank-signature-bank-portfolios-sources.html "Exclusive-U.S. regulator seeks sale of Silicon Valley Bank, Signature Bank portfolios-sources"). There was also some [talk the Federal Reserve](https://www.financedigest.com/u-s-money-reserve-reviews-real-talk-about-diversifying-with-precious-metals.html "U.S. Money Reserve Reviews: Real Talk About Diversifying With Precious Metals") could expand its new lending programme for banks as another step to reassuring depositors.

[Money is clearly flowing out of smaller banks toward their bigger siblings and to money market funds](https://www.financedigest.com/explainer-why-european-money-market-funds-inflows-are-lagging-behind-the-u-s-torrent.html "Explainer-Why European money market funds inflows are lagging behind the U.S. torrent?"), which have seen an inflow of more than $300 billion in the past month to a record $5.1 trillion. BofA notes the prior two events like this in 2008 and 2020 were followed by [Fed rate](https://www.financedigest.com/wage-data-dents-dollar-recovery-before-fed-rate-decision.html "Wage data dents dollar recovery before Fed rate decision") cuts.

Fund futures now show an 88% chance the Fed stands pat in May, while a July [cut is priced](https://www.financedigest.com/tesla-posts-record-quarterly-deliveries-after-price-cuts-up-4-from-q4.html "Tesla posts record quarterly deliveries after price cuts, up 4% from Q4") at better than 90%.

Deposits at small [banks fell by $120 billion](https://www.financedigest.com/20-billion-in-bank-service-fees-are-you-overpaying.html " Billion in Bank Service Fees: Are You Overpaying?") in the week to March 15, while borrowing jumped $253 billion and presumably much of that was from the Fed.

Capital Economics points out that deposits across all the [banks have fallen by $663 billion in the past year as customers](https://www.financedigest.com/how-will-open-banking-impact-the-customer-experience.html "How will Open Banking impact the customer experience?") search for higher yield.

Unless banks are willing to jack up their [deposit rates to prevent that flight](https://www.financedigest.com/apollo-assures-investors-deposit-flight-wont-spill-over-to-athene.html "Apollo assures investors deposit flight won’t spill over to Athene"), they will eventually have to rein in the size of their loan portfolios, with the resulting squeeze on economic activity another reason to expect a recession is coming soon,” they warn.

European banks face similar strains, with the added speculative stress on Deutsche [Bank and a general jump in the cost of credit default swaps](https://www.financedigest.com/explainer-what-are-credit-default-swaps-and-why-are-they-causing-trouble-for-europes-banks.html "Explainer-What are credit default swaps and why are they causing trouble for Europe’s banks?"). [Deutsche Bank’s](https://www.financedigest.com/deutsche-bank-equity-bear-market-rally-will-stretch-into-2023-dollar-weaker.html "Deutsche Bank: Equity bear market rally will stretch into 2023, dollar weaker") five-year CDS hit 222 bps on Friday, the highest since late 2018, while UBS CDS shot up to 139 bps.

Credit Suisse had to tap the Swiss National [Bank for “a large multi-billion amount” to secure its liquidity](https://www.financedigest.com/boes-bailey-says-bank-reforms-worked-but-questions-about-liquidity-buffers.html "BoE’s Bailey says bank reforms worked but questions about liquidity buffers"). Not only were customers withdrawing [money but counterparties were demanding guarantees to keep doing business](https://www.financedigest.com/how-to-save-money-on-business-tripsabroad.html "How to save money on business trips abroad"), hardly an encouraging sign when interbank lending relies so much on trust.

Key [developments that could influence markets](https://www.financedigest.com/concrete-placing-booms-market-notable-developments-geographical-outlook.html "Concrete Placing Booms Market: Notable Developments & Geographical Outlook") on Monday:

– German IFO [survey for March](https://www.financedigest.com/uk-recruiters-slow-pace-of-pay-growth-in-march-rec-survey-shows.html "UK recruiters slow pace of pay growth in March, REC survey shows") is seen around 91.0

– [Bank of Spain´s Governor Pablo Hernandez de Cos delivers speech on economy](https://www.financedigest.com/bank-of-canada-seen-on-hold-even-as-economy-accelerates.html "Bank of Canada seen on hold even as economy accelerates"). ECB Board members Frank Elderson and Isabel Schnabel speak, as does Andrew Bailey Governor of the [Bank of England](https://www.financedigest.com/bank-of-england-fines-former-tsb-executive-over-2018-it-failure.html "Bank of England fines former TSB executive over 2018 IT failure")

– Federal Reserve Board [Governor Philip Jefferson speaks on “Implementation and Transmission of Monetary Policy”](https://www.financedigest.com/yen-trims-gains-as-possible-next-boj-governor-says-current-policy-appropriate.html "Yen trims gains as possible next BOJ governor says current policy appropriate")

(Editing by Jacqueline Wong)


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