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US banks shaken by biggest fund withdrawals since 9/11

Published time: January 25, 2013 11:45
Edited time: January 27, 2013 13:27
Joe Raedle / Getty Images / AFP

Joe Raedle / Getty Images / AFP

US Federal Reserve is reporting a major deposit withdrawal from the nation’s bank accounts. The financial system has not seen such a massive fund outflow since 9/11 attacks.

­The first week of January 2013 has seen $114 billion withdrawn from 25 of the US’ biggest banks, pushing deposits down to $5.37 trillion, according to the US Fed.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. 

There are a number of reasons behind this unpredicted fund outflow. Some experts believe it has to do with the beginning of the year when the money is randomly needed here and there. Others have concluded the funds are getting down to business and being invested.

Another set of data from the US Federal Reserve shows some deposits may have moved within the banking system from one type of account to another.

Comments (4)

 

Hugh 30.01.2014 00:22

RT - Why are you running this story from January of 2013 now? You're 1 year late or else your dates in the article are wrong. Please correct this. (Check the date of the story - ED.)

 

George Dreisch 28.01.2014 12:46

I'm no financial expert, but how can this not be a effect of China putting a hold on money transfers?

 

KTsBabe2702 28.01.2014 06:30

It may not be as much the government's fault as it is US Bank's fault. They "fee" their customers to death! They also require you to agree to online statements and notification just to keep an eye on your account online. You cannot even view your account unless you agree to it. People are tired of working to pay someone else (who profits off the money deposited) by making the choice to trust them with their money!

View all comments (4)
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