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Money flows into banks

By Marcie Geffner · Bankrate.com
Thursday, March 1, 2012
Posted: 9 am ET

$250 billion.

That's how much money consumers added to their bank accounts in the last three months of 2011, according to Market Rates Insight, or MRI, a San Anselmo, Calif.-based company that provides competitive pricing data to financial institutions.

Total deposits, including those made to overseas branches of U.S. banks, increased $183 billion in the fourth quarter of 2011, which means approximately $33 billion was transferred from overseas U.S. banks to domestic branches, MRI said in a statement.

Deposits to domestic FDIC-insured banks increased $882 billion to more than $8 trillion last year. Add deposits to overseas branches and that total increased $760 billion to more than $10 trillion.

Money continued to flow out of term accounts, such as certificates of deposit, or CDs, and into liquid alternatives, such as checking, savings and money market accounts. During the year, CDs balances decreased $157 billion while checking, savings and money market balances increased more than $1 trillion.

Consumer retail deposits now make up 89 percent of domestic deposits, up slightly from the start of 2011, indicating that more current deposits have been made by individuals, not businesses. That increase occurred despite a drop in the national average interest rate for such deposits from 0.84 percent in January to 0.62 percent in December, according to MRI.

MRI EVP Dan Geller said the figures have "a double message."

"More consumers are risk-averse and prefer the safety and security of FDIC-insured deposits, and more consumers prefer to bank domestically than overseas," Geller said in a statement.

Given the preference for safety over risk, it's not surprising that some of the banks' new deposits appeared to have migrated from stocks, bonds and mutual funds, based on figures from the Investment Company Institute, ICI, an arm of the National Association of U.S. Investment Companies.

ICI data suggest that trend reversed at the start of this year, so it's now an open question whether banks will keep all those new deposits or watch the money shift away again to riskier options.

Follow me on Twitter: @marciegeff.

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