Large US banks are being inundated with requests from customers trying to transfer funds from smaller lenders, as the failure of Silicon Valley Bank results in what executives say is the biggest movement of deposits in more than a decade.
JPMorgan Chase, Citigroup and other large financial institutions are trying to accommodate customers wanting to move deposits quickly, taking extra steps to speed up the normal sign-up or “onboarding” process, according to several people familiar with the matter.
A package of emergency measures unveiled by the US government on Sunday, including a new Federal Reserve lending facility for banks, appears to have passed its first major test for now by staving off the failure of a third bank following the implosion of SVB and Signature Bank.
However depositors are still attempting to move balances into larger banks such as JPMorgan, Citi and Bank of America, as well as money market funds, the people said. That is especially the case when balances exceed the $250,000 threshold that is guaranteed by federal insurance.
Deposit transfers from SVB and other regional lenders to large banks picked up steam last week and continued on Monday, the people said. “The calls have been coming in today like airplanes stacked on a snowy day at O’Hare airport,” said one senior banker, referring to Chicago’s busy aviation hub.
JPMorgan has shortened the waiting time for opening an account and is expediting the speed at which new corporate customers can access funds to ensure they can pay staff at the end of this week, according to one person briefed on the matter.
Several banks have reassigned employees to jobs connected to account openings, the people said.
Citi’s private bank, which caters to wealthy individuals, is trying to open accounts within a day of application compared with the typical timeline of one to two weeks, some of the people said. The lender has also started to open accounts and initiate money transfer procedures while the new client is still undergoing compliance checks.
Executives say they are walking a fine line because they do not want to be accused of exploiting the situation. JPMorgan has told bankers they should not make active attempts to poach clients from smaller rivals, according to people briefed on the discussions.
JPMorgan, Citi and BofA and First Republic declined to comment.
“Goliath is winning,” Wells Fargo banking analyst Mike Mayo declared in a research note on Monday as he singled out JPMorgan as a beneficiary “in these less certain times”.
Shares in several regional US banks, including San Francisco-based First Republic and Phoenix-headquartered Western Alliance Bank, closed sharply lower on Monday despite a pledge from US president Joe Biden to reassure investors that his administration would do “whatever is needed” to protect depositors. The stock prices of many such banks partly recovered in after-hours trading.
Large asset managers also reported an influx of cash being pulled from lenders following an anxious few days for bank depositors.
“Flows across the industry have been from the banks and into money market funds,” said one person familiar with the operations of a large US asset manager. Money market funds are more tightly supervised than they were in the run-up to the 2008 crisis, when some required government intervention.
For some depositors, the failure of SVB highlighted the risk of having all their cash at a single bank. Before regulators stepped in with a pledge to guarantee all deposits on Sunday, many of SVB’s corporate clients in the technology and life sciences industry had been worried that they would be unable pay staff or suppliers.
“Clients are like . . . ‘I’ve learnt my lesson, I’m not just diversifying my portfolio, I want to diversify my bank’,” said one private banker at a large firm.