Wednesday, May 24, 2023

New Paper - Flight to Safety in the Regional Bank Crisis of 2023

Yesterday, a new paper by Cecilia Caglio, Jennifer Dlugosz, and Marcelo Rezende - all affiliated with the Board of Governors of the Federal Reserve System - posted on SSRN, Flight to Safety in the Regional Bank Crisis of 2023.  It's obviously an incredibly timely piece.  Here's the Abstract:

"Using weekly confidential data from U.S. banks, we document an unprecedented flight to safety of deposits from regional banks towards large banks in the early 2023. We show that large banks experienced large deposit inflows relative to small and regional banks and that these differences remain substantial if we account for bank characteristics associated with bank failures over this crisis, including liquidation values and shares of uninsured deposits. Large banks lowered deposit rates relative to other banks during the crisis, supporting the hypothesis that deposits flew to these banks because they are considered safer."   

https://lawprofessors.typepad.com/business_law/2023/05/new-article-flight-to-safety-in-the-regional-bank-crisis-of-2023.html

Colleen Baker, Financial Markets | Permalink

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