With the clock ticking on unlimited deposit insurance, and chances for an extension slim, which banks have the most to lose?
How much money might move without the Transaction Account Guarantee program, and where it will go, is debatable. But many banks across the size spectrum rely heavily on the funding in question: Transaction deposits in accounts with balances of more than $250,000 make up more than 10% of assets at more than 900 institutions. (See the following graphic. Interactive controls are described in the captions. Text continues below.)
Data on such deposits is available for almost all the country’s roughly 7,000 banks. (Many institutions have sibling banks owned by the same holding company.)
TAG deposits make up about 16% of the $10.5 trillion of deposits kept at banks industrywide, or about 14% of the total if one excludes the amount that would be covered without the unlimited insurance. The original crisis program, designed to stabilize funding for lenders, was replaced by a provision of the Dodd-Frank Act that is set to expire at the end of this year.
Just four banks — subsidiaries of Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (NYSE:C) — account for 50% of all TAG deposits, and the median ratio of TAG deposits to assets across the industry is just 3.5%. Roughly 600 banks have no TAG deposits at all.
Nevertheless, most banks where TAG deposits fund more than 10% of the balance sheet are small. That group has a median asset size of about $250 million.
Many of the institutions that have exceptionally high ratios of TAG deposits to assets are bankers’ banks that are heavily funded by deposits of other institutions.
Many TAG-heavy banks, including large business-focused institutions like Comerica (CMA), have also long been funded by jumbo accounts, since well before the crisis. (For historical data on jumbo deposits at a group of banks that currently have high levels, click on the “Historical” tab in the graphic above. Under regulatory reporting requirements, jumbo deposits represent balances in accounts with more than $250,000 from the third quarter of 2009 on and more than $100,000 before. The permanent cap on insured balances was raised from $100,000 to $250,000 in late 2008.)
Whether transaction balances will stay put or banks will have to pay more to secure alternate funding, the breadth of the exposure to TAG deposits makes it easy to see why the industry has been fighting so hard for an extension.