We can get a sense of what’s going on with regional banks by looking at the KRE regional bank stock index.  You can see it’s still down a lot and basically hasn’t recovered since SVB.  This is consistent with investors pricing in higher betas for these banks: (13/13)

The aggregate data is dominated by the largest banks, so the regionals and community banks are hard to see here. Individual bank data is only quarterly through June so it will take some time. (12/13)

The overall story is that betas have not accelerated at the level of the banking system. Of course, there are potentially big differences across banks, which this data does not show. (11/13)

Ok, so using these deposit amounts and rates, we can calculate an overall deposit rate and beta for the banking system. It looks like this: (10/13)

We call it the “deposits channel of monetary policy” in our work. As the Fed raises rates, some depositors react to the low betas and switch to money market funds. Banks then shrink their balance sheets by lending less to firms and mortgage borrowers, slowing the economy. (9/13)

Two observations: 1) Deposits are really big, $17 trillion, so they are crucial for banks and lending. 2) Deposits have been running off throughout the hiking cycle with a slight acceleration post SVB. This happens in every cycle. It is part of how monetary policy works. (8/13)

As Josh explains, there is churn across categories such that the overall beta is changing.  Here’s a picture of each of the three types of deposits above.  The data is from the Fed’s H.6 release, also available on FRED: fred.stlouisfed.org/release/tabl...
(7/13)

If anything, this is low by historical standards. You can see it in this picture, which shows the historical betas versus ones estimated just from the 2015-19 cycle. (6/13)

The punchline is that there is no sign of acceleration in betas post SVB for the overall banking system. Checking deposits pay virtually nothing, savings deposits pay 0.65%, and time deposits pay 1.8%. Their betas are therefore roughly 0, 0.12, and 0.34. (5/13)

Here’s a plot. The black line is the Fed funds rate, which is now up to 5.5%. The green line is the national average rate on interest checking deposits, the red line is savings deposits, and the blue line is insured time deposits (CDs). (4/13)

It’s actually really easy to calculate deposit betas for the overall banking system.  The FDIC publishes national average deposit rates by type of deposit on a monthly basis.  You can find the data on FRED: fred.stlouisfed.org/release/tabl... (3/13)

At the time there was a big concern that betas would rise sharply, eroding the deposit franchise. This would undermine banks’ business model and make them seriously unhedged to interest rate risk. (2/13)