The 2023 banking turmoil raised questions about how stable nonmaturity deposits really are under stress, academic research shows. Deposit insurance, strong capital and liquidity, and reciprocal deposits can help reduce outflows by limiting uninsured balances and giving customers more reason to keep their money at the bank. At the same time, money market funds have become stronger competitors for deposits, particularly when rates rise.
For banks, the key is knowing which deposits could leave quickly and whether their balance sheets would give customers confidence during a period of stress.
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