Banks rely on bulk deposits as retail dries up

Banks are seeing slower, more “flighty” retail deposits and, in many cases, have filled gaps with more rate‑sensitive wholesale and large “bulk” deposits, though this reliance is not uniform and has recently started to ease at many institutions.

What is happening to retail deposits?

Pandemic-era excess cash that swelled checking and savings accounts has been running off as rates rose and households spent down buffers, leading to sluggish retail deposit growth through at least 2025. In the 2023–24 tightening cycle, many consumers shifted balances into money market funds and higher‑yield alternatives, increasing the flightiness of deposits and making banks’ funding more sensitive to rate moves. Mid‑size and community banks have lost primary retail relationships and share of checking accounts to megabanks over the past decade, intensifying competition for stable retail funding.

How are banks replacing those deposits?

To defend liquidity, many banks leaned more on large uninsured balances, brokered deposits, and advances from the Federal Home Loan Bank (FHLB) system—forms of wholesale or “bulk” funding that can be raised quickly but at higher cost. After the March 2023 turmoil, some institutions boosted wholesale funding and contingent lines to ensure they could meet rapid outflows from concentrated or uninsured customers. Survey data show a notable share of banks have increased usage of FHLB advances and special high‑rate deposit promotions as part of their funding toolkit.

Are banks now relying more on bulk deposits?

Regulators report that, in aggregate, banks’ overall funding mix at the end of 2024 looked similar to 2023, but with a higher share of interest‑bearing and uninsured deposits, indicating more reliance on price‑sensitive funding even if traditional brokered deposits have begun to decline. Industry data for 2024–25 show brokered deposits as a share of liabilities drifting down and many community banks using renewed core deposit growth to reduce wholesale borrowings, suggesting that peak reliance on bulk funding may have passed for some segments. However, midcap and smaller banks that lost retail relationships still face structural pressure and may remain more dependent on large, concentrated and non‑core deposits than in the pre‑2020 period.

Why does this matter?

Bulk and wholesale deposits typically reprice faster and can run off more quickly than small insured retail balances, so a greater share of such funding raises both interest‑rate and liquidity risk. Banks that maintain a higher portion of granular retail deposits tend to enjoy lower cost of funds and better net interest margins than peers that lean more on wholesale sources, making the retail‑versus‑bulk funding mix a key driver of profitability and resilience.