AI deposits may increase loan rates for borrowers
AI-directed bank accounts could rapidly shift deposits among banks, weakening the funding advantage for long-term credit, according to a Federal Reserve Bank of Dallas analysis. Demand deposits typically remain at banks for years, with deposit rates rising less than market rates, making them behave like long-duration funding. The Dallas Fed estimates about 7000 billion dollars of asset-side interest-rate exposure in 10-year equivalents, with approximately 5840 billion dollars supported by the duration characteristics of non-large time deposits. Instant settlement could allow yield-sensitive customers to switch banks quickly, while programmable rules and AI could automate this process. A 10% increase in deposit price sensitivity could reduce aggregate duration-risk appetite by about 700 billion dollars in 10-year equivalents, while a 10% reduction in weighted average life could cut maturity-transformation capacity by about 580 billion dollars. The Dallas Fed links 5840 billion dollars of deposit-backed bank assets to a 700 billion dollars reduction in duration-risk appetite under higher deposit sensitivity. Banks may issue more term debt to maintain lending composition, but this could raise borrowing costs for consumers and businesses. A 2025 Central Bank of Brazil paper indicates that instant-payment systems can alter bank liquidity behavior. Tokenized deposits are still in early development, and their impact remains uncertain.
-- Price
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