Monday, 4 November 2013

Afraid of Bank Runs? US Banks' Equity to Deposit Ratio Plummets to 8.69% Below Pre-Lehman Level

US Commercial Banks' equity (net assets) to Deposits ratio continues to drop. As of the most recent week reported by the Federal Reserve, the ratio (4 week average) plummeted to 15.57%, 1.48 percentage points, or 8.69%, below the 17.06% reported on 10 September 2008 (the week before Lehman collapsed).

This means that US commercial banks only keep 15.57 cents in equity for every dollar of deposits. Keep that in mind if you incorrectly think your deposits are fully backed by reserves.

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