(Bloomberg) -- Deposits at US lenders continued to slide in the week before three bank failures triggered a bout of global financial turmoil.

Bank deposits fell by $54.4 billion to $17.6 trillion in the week ended March 8, according to Federal Reserve data released Friday. Deposits have declined by some $500 billion from their peak in April last year, a steady drop that’s added to strains in the financial system.

The Fed’s weekly snapshot of US banks has suddenly become a key data point for markets and the economy, after the collapse of Silicon Valley Bank and two other lenders. There’s concern that depositors seeking to move their money — to shield themselves from further bank failures, or seek higher returns after the Fed’s interest-rate hikes — could push more banks into trouble.

Another worry is that banks will tighten lending standards as they seek to shore up their own finances, choking off the flow of loans that helps the economy expand. There were already signs of a slowdown in credit growth in the past few weeks.

Overall bank lending rose by $7 billion to $12.1 trillion in the week through March 8, the latest Fed data show. 

“One thing we can be relatively confident about is that banks are now likely to restrict the availability of credit to households and firms more aggressively” than they would otherwise have done, wrote Simon MacAdam, an economist at Capital Economics. “The credit impulse to the real economy is likely to fall even further into recessionary territory in the months ahead.”

The biggest 25 banks account for roughly three-fifths of lending, but in some key areas — including commercial real estate — smaller banks are the most important providers of credit.

Dash for Cash

After last weekend’s collapse of SVB, the Fed offered additional backstops for lenders in need of liquidity. Banks borrowed a combined $165 billion from two new facilities, according to separate data released on Thursday, a sign of escalated funding strains.

Altogether, the surge of emergency borrowing added some $440 billion in reserves to the Fed’s balance sheet in a matter of days— reversing the shrinkage that had taken place under the policy known as quantitative tightening, launched in June last year.

Before that injection of support, the cash assets held by banks — as a share of their total assets — had fallen to the lowest levels in three years.

The Fed’s next report on assets and liabilities of commercial banks, due on March 24, will be scrutinized for signs of impact from the past week’s drama. The report, known as H.8, includes breakdowns of credit by destination — such as consumer, real estate and commercial loans — as well as categories based on bank size. 

--With assistance from Reade Pickert.

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