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Community Bank Funding Is Getting Costlier and Riskier

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Abstract

Banks’ core funding has been under pressure since the Federal Open Market Committee (FOMC) began raising rates in early 2022. As depositors shift funds out of low-yielding savings and noninterest-bearing deposit accounts and into more lucrative alternative investments, community banks have increasingly turned to longer-maturity deposits and borrowings to finance their balance sheets. Although these funding sources allow banks to retain their asset size, they are both more expensive and potentially less stable.

Suggested Citation

  • Brendan Laliberte & W. Blake Marsh & Padma Sharma, 2023. "Community Bank Funding Is Getting Costlier and Riskier," Economic Bulletin, Federal Reserve Bank of Kansas City, pages 1-4, December.
    • Handle: RePEc:fip:fedkeb:97573
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