Cash and short-term allocation to bank deposits drop to the lowest in four years

Forty-seven percent of organisations’ cash and short-term allocation are maintained in bank deposits, according to the 2023 Association for Financial Professionals (AFP) Liquidity Survey, underwritten by Invesco. This figure is down eight percentage points from 2022 and is the lowest recorded in four years.

In response to the bank failures that occurred in March 2023, organisations began moving their cash and short-term investments from banks into government/treasury money market funds (up four percentage points), treasury bills (up two percentage points) and agencies (up two percentage points).

Thirty-eight percent of treasury professionals report that their organisations plan to continue increasing their cash allocations to government/treasury money market funds into the next year, while only 8% indicate that their companies plan to decrease allocations to these funds. However, 27% plan to increase allocations in bank deposits, while 25% are looking to decrease their deposits in banks.

An organisation’s overall relationship with its bank remains the primary determinant in choosing where to maintain deposits (cited by 83% of respondents). However, this figure is down 10 percentage points from 2022 and suggests that treasury professionals are choosing to be more cautious in their approach to relationships with banking partners in response to recent bank failures.