An Abundance of Riches: Do Increasing Deposits Mean Less for Borrowers?
Attracting deposits for banks isn’t always an easy thing, witness the use of brokered deposits. But these days, since the beginning of the pandemic, deposits in banks have jumped to over $15.8 trillion in the first quarter, or over 13% increase from the prior year, and were up again for most of the second quarter.[1] Both businesses and individuals seem to be awash in liquidity. Individuals are selling stocks and holding cash, companies are holding on to their cash and not investing in capital or other expenditures. Many small businesses that received PPP or similar COVID-related loans are holding the proceeds and assessing which expenses they can be allocated against.
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