Small banks, in particular, are losing deposits to money-market funds at an alarming pace. The month of March 2023 witnessed the fastest withdrawal of funds from commercial banks in U.S. history. 
According to data released by the Federal Reserve, a staggering $360 billion was withdrawn from banks across the country in the last month alone. To put this into context, not a single monthly decline in 2008 exceeded $100 billion. The recent withdrawals have dwarfed those of the past, bringing total bank deposits down by almost $1 trillion since the highs in April 2022.
Data from Bank of America show a commensurate surge in money-market fund assets over the last few months. Money-market funds invest in short-term debt—often government bonds—to earn yield while offering a highly liquid.
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