Tuesday, November 8, 2011

US Commercial Banks

US commercial banks have lots of cash and continue to deleverage. At the end of October, banks held a record $2.5 trillion in liquid assets. They accounted for 26.6% of bank credit, which remained near the highest percentage since mid-2005. They were only 20.0% of bank assets at the end of October, because assets have been boosted by a huge increase in cash held as bank reserves over the past three years from $329.8 billion on September 10, 2008, to a record $2.0 trillion on June 29 of this year. Cash was down to a still enormous $1.7 trillion at the end of October. Combined cash and liquid assets accounted for 33.3% of total bank assets at the end of October. That’s near the record high of 35.0% 17 weeks ago.
The most remarkable development in the banking sector is that borrowing by the banks as a percentage of their liabilities has plunged from a record high of 24.5% during October 2008 to a record low of 14.1% at the end of October. Banks have taken advantage of the huge inflows into their deposits to reduce their leverage.

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