Independent Strategy

Banking Monitor

With the immediate liquidity crisis over, the Fed has now returned to cutting its balance sheet, mainly through reductions in securities held and FX repos. However, total bank borrowing from the Fed’s facilities continues to rise, if only slightly. Including FHLB loans, the total liquidity injection into the banks since March is $600bn. Deposit outflows have fallen to a trickle. The question is whether the March crisis will permanently reduce bank lending growth; loans rose only slightly last week. Investors remain out of small banks stocks and loans to small businesses have dived.

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