Fed releases its Senior Financial Officer Survey results

Federal Issues Federal Reserve Banks

On December 15, the Federal Reserve Board of Governors released the results from a survey sent in September to senior bank officers asking questions about their strategies and practices for managing reserve balances, called the “Senior Financial Officer Survey” (SFOS). Ninety-three of the 100 surveyed banks responded, including 59 domestic and 34 foreign banking organizations, holding, in the aggregate, three-fourths of the total reserve balances in the banking system.

The survey results summarized answers in four sections. Part one’s responses were on the bank’s balance sheet strategy. The Fed reported that roughly two-thirds of respondents expect the size of their balance sheet to remain unchanged (plus or minus two percent) over the next six months. For part two of the survey, the Fed gleaned feedback on a bank official’s lowest comfortable level of reserves (LCLOR) – defined as the lowest dollar level comfortably held in reserves by the bank, before taking any action to increase their reserves. When compared to the May 2023 results of the SFOS survey, half of the respondents reported the same LCLOR, or within a ten percent range, to their previous estimate; the remaining respondents were split between increases or decreases larger than the ten percent range. Three-fourths of respondents reported that their bank does not allow reserves to fluctuate below its LCLOR.

Part three discusses deposit rates and the survey asked about a bank’s cumulative deposit betas from March 2022 to September 2023. Respondents reported an average cumulative retail deposit beta of 35 percent from that period, and estimated retail deposit betas to be 41 percent for the period through March 2024. Lastly, in part four, the Fed’s survey asked about the bank’s views on standing repo facility (SRF). Among the respondent banks meeting the criteria to be an SRF, half reported that they already were an SRF counterparty or expressed interest in becoming one, while the remainder reported no interest in becoming a counterparty on SRF.