US Banks Hoarding Cash... "Double the Amount Before the Pandemic"

5.4% Increase Compared to One Year Ago

U.S. banks are engaged in a battle to secure cash. Since the sudden bank run crisis in March that triggered turmoil in the banking sector, concerns about the potential introduction of regulatory measures by authorities have spread, leading banks to prepare for a prolonged struggle.

According to major foreign media on the 5th (local time), the total cash assets of U.S. banks and other lending institutions amounted to $3.26 trillion (as of the 23rd of last month, approximately 4,350 trillion KRW), marking a 5.4% increase compared to the same period last year. The cash assets of U.S. banks surged to $3.49 trillion (about 4,650 trillion KRW) following the collapse of Silicon Valley Bank (SVB), which triggered the bank run crisis in March, then declined afterward but remain roughly twice as high as pre-pandemic levels.

SVB, a mid-sized bank with assets of $209 billion that served as a financial lifeline for Western startups, collapsed instantly due to a bank run, and in the aftermath of SVB’s collapse, Signature Bank, headquartered in New York, also went bankrupt in succession. Subsequently, to prevent further failures, U.S. financial authorities implemented measures such as deposit protection and liquidity support, while individual banks focused on building self-help strategies. David Panigrahi, Senior Vice President at credit rating agency Moody’s, analyzed that "the chain of regional bank failures has raised significant alarm within the banking sector."

[Image source=Reuters Yonhap News]

JP Morgan, Wall Street’s largest investment bank, is known to have steadily secured cash over the past year. JP Morgan currently holds $420 billion (approximately 560 trillion KRW) in cash and $990 billion (about 1,320 trillion KRW) in high-quality liquid assets. Bank of America, another major U.S. bank, liquidated $93 billion (about 124 trillion KRW) in assets during the first and second quarters of this year. As of the end of June, Bank of America’s cash assets amounted to $374 billion (approximately 499 trillion KRW).

Cash assets of U.S. small and medium-sized banks, which were directly hit by the SVB crisis, increased by 12% compared to the beginning of the year, and the cash holdings of the top 25 banks also rose by 2.9% during the same period. This reflects the judgment that maintaining a high level of cash is necessary to offset customer deposit withdrawals and loan losses caused by interest rate hikes. Senior Vice President Panigrahi stated, "This is a logical response to an economic slowdown," adding that it is even more so in situations where cash must be maintained amid deposit outflows.

In particular, mid-sized banks are reportedly concerned about regulations that authorities may introduce. U.S. regulators have indicated that they may impose stricter capital and liquidity requirements on banks with assets exceeding $100 billion (approximately 133 trillion KRW).

Banks have also been focusing more on liquidity and asset-liability management capabilities since the SVB crisis in March. Peter Marshall, head of EY’s Financial Services Liquidity Advisory Group, said, "Regulators will not be lenient toward banks that have gaps in liquidity management and on-balance-sheet lending."

This content was produced with the assistance of AI translation services.