The Rise in Deposit Flightiness and Its Implications for Financial Stability

Kristian Blickle, Jian Li (), Xu Lu () and Yiming Ma
Additional contact information
Jian Li: https://business.columbia.edu/faculty/people/jane-jian-li
Xu Lu: https://foster.uw.edu/faculty-research/directory/xu-lu/

No 20250710, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Deposits are often perceived as a stable funding source for banks. However, the risk of deposits rapidly leaving banks—known as deposit flightiness—has come under increased scrutiny following the failures of Silicon Valley Bank and other regional banks in March 2023. In a new paper, we show that deposit flightiness is not constant over time. In particular, flightiness reached historic highs after expansions in bank reserves associated with rounds of quantitative easing (QE). We argue that this elevated deposit flightiness may amplify the banking sector’s response to subsequent monetary policy rate hikes, highlighting a link between the Federal Reserve’s balance sheet and conventional monetary policy.

Keywords: banking; deposits (search for similar items in EconPapers)
JEL-codes: E00 G20 G21 (search for similar items in EconPapers)
Date: 2025-07-10
New Economics Papers: this item is included in nep-mon
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