The next financial crisis could come from banking liquidity.
The perfect storm of liquidity shortfall is approaching with the culmination of three major factors of which only one is controllable by the banking industry.
1)?????? Banking institutions are losing deposits. Banks and credit unions combined lost $811 billion of Money Market Account balances in 2023, much of it to Money Market Fund of brokerage firms. Balances of Money Market Funds at brokerage firms amount to over $6 trillion and growing rapidly. This money is non investible, and is sitting idle yielding about 5%. ?
Unless banks and credit unions practice rate optimization and equity projection, these banking institutions are likely to experience greater liquidity loss.? By providing the Scientifically Predictable investing projection to their self-directed customers and members, these banking institutors will be able to protect their liquidity from moving over to brokerage firms.
2)?????? Decreasing saving rate.? Personal Saving Rate in the U.S. decreased in February 2024 to, 3.6% from 4.1% in January 2024. This trend is projected to continue, meaning that consumers have less money to deposit in banking institutors.
3)?????? Basel III implementation. ?Basel III mandates higher liquidity ratios from banking institutions. . The FSB has designated Basel III as one of the priority areas for implementation, which means that banks and credit unions will have to set aside greater liquidity levels, of which they now have less.
Out of these three liquidity factors, the only factor banking institutions can control is the outflow of deposit balances to Money Market Fund at brokerage firms. Banking institutions can provide their self-directed investors the Scientifically Predictable investing projection in return for keeping their non-investable money as a deposit at the bank or credit union.