Aggregate bank deposit flows in the U.S.

This paper investigates the dynamics of aggregate deposit inflows, outflows, and the reallocation of deposits within the U.S. banking system from 1984 to 2022, with a particular focus on the effects of the COVID-19 pandemic. We find that, on average, deposit inflows are nearly three times larger and twice as volatile as outflows. Larger banks generally attract and retain more deposits than smaller ones, with significant reallocation of deposits to banks that offer higher rates, have lower insolvency risk, and lower capital levels. During the COVID-19 pandemic, total and core deposit inflows increased, whereas inflows of large time-deposits declined. Concurrently, outflows of large time-deposits surged, particularly in large banks. The pandemic also saw a shift in deposit reallocation patterns, with a notable movement of large time-deposits from large banks to smaller banks, reversing pre-pandemic trends. Our findings underscore the importance of understanding deposit flows and depositor diversity for assessing banking stability and highlight market discipline among depositors, who gravitate toward banks offering greater utility.