SAN ANSELMO, Calif. Deposit balances in FDIC-insured institutions declined for the second consecutive quarter of 2013, according to the latest analysis from Market Rates Insight.
In the second quarter of 2013, total domestic-deposit balances declined by $31 billion compared to the first quarter of this year a decreased of 0.3%, MRI reported. Similarly, in the first quarter of 2013, total domestic deposits decreased by about $20 billion, or 0.2%, according to the quarterly report released yesterday by the FDIC.
“The decrease in domestic deposit balances comes after six years of continued increase in deposit balances despite a record decrease in deposits interest rates,” the company said. “The decline in deposits rates started in July of 2007, when the national average rate for deposits stood at 3.28%. Ever since, the national average rate for deposits continually declined and reached its lowest level of 0.28% in July of this year a decline of 300 basis points or 91% in the yield value. During the same time period, July 2007 to July 2013, total domestic deposits balances increased from $6.7 trillion to $9.4 trillion an increase of $2.7 trillion or 40% in six years.”
Both deposit categories declined in the second quarter of this year, MRI noted. Certificates of deposit balances declined by nearly $12 billion or 0.7%, and total balances of liquid accounts, including checking, savings and money market accounts, declined by about $19 billion, or 0.2%. However, some types of deposit accounts experienced an increase in balances during the second quarter of this year. Balances of short term CDs of 3-month or less increased by $26 billion or 9.4%, and money market account balances increased by nearly $50 billion or 1.1%.
“The overall decline in deposits balances in the second quarter of 2013 is an indication that interest rates on deposits are likely to start climbing up in the near future” said Dan Geller, EVP at Market Rates Insight, “Financial institutions will need to start increasing interest rates on deposits in order to maintain current deposits levels and to increase liquidity ratio as mandated by Basel III.”
