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Core Bank Deposits Increasing

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NU Online News Service, April 24, 11:02 a.m. – Core U.S. bank deposits have increased over the past five quarters as a result of the recent economic downturn, according to a new report from Standard & Poor’s, New York.

The deposit growth figures show that consumers and business investors have enormous confidence in banks, even in times of economic crisis, says Charles Rauch, the S&P director who wrote the report.

Rauch has identified two spurts of deposit growth between 1997 and 2001.

The first occurred during the fourth quarter of 1998, which followed the Russian credit default and the collapse of Long Term Capital Management, a large hedge fund. The second occurred in the fourth quarter of 2001, following the Sept. 11 attacks and the unfolding of the Enron Corp. bankruptcy.

Depositors’ flight to safety can help increase the supply of bank lending capacity available to well-run corporations, Rauch writes.

In bad times, “the banks have become the lender of last resort to corporate America,” Rauch says.