Liquidity & Balance Sheet
Cash and Due from Banks
Also known as Cash & Due From
Cash and Due from Banks is the bank's most liquid asset — currency in vault, deposits at the Federal Reserve, and balances due from correspondent banks. It is the first line of defense against deposit outflows.
Formula
Currency includes vault cash. Reserves at Federal Reserve includes the bank's deposit balance at its regional Reserve Bank. Due from Banks captures balances the bank holds at correspondent banks, typically used for clearing services.
Why it matters
Cash earns interest on reserves (currently the IORB rate) but yields less than loans or longer-dated securities. Banks balance running 'too much' cash (margin drag) against 'too little' (liquidity stress). The post-pandemic period saw US banking-system cash balloon to $3T+ as quantitative easing flooded reserves into the system.
How to interpret
Cash / Assets above 15% signals a defensively positioned bank — typical post-2020. Below 5% signals an aggressively deployed balance sheet with limited immediate liquidity cushion. Aggregate cash has fallen as Federal Reserve quantitative tightening progressed but remains well above pre-pandemic norms.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| > 15% | Defensive | Heavy liquidity cushion; possible margin drag. |
| 8–15% | Balanced | Typical post-2020 positioning. |
| 4–8% | Light | Limited immediate liquidity buffer. |
| < 4% | Minimal | Highly deployed balance sheet. |
Worked example
Frequently asked
Why do banks hold cash at the Federal Reserve?
Required reserves were reduced to zero in March 2020. Banks now hold reserves voluntarily — to earn the IORB rate (currently above the effective fed funds rate) and to maintain payment-system liquidity.
How is cash different from cash equivalents?
In bank accounting, cash includes currency, reserves, and due-from balances. Cash equivalents (under GAAP) extends to short-dated highly liquid instruments like Treasury bills and commercial paper. Call report and GAAP definitions can diverge slightly.
Why did US banking-system cash explode after 2020?
Federal Reserve quantitative easing in response to COVID purchased trillions in Treasuries and MBS, settling cash into commercial-bank reserve accounts. Even as QT has reversed some of this, reserves remain elevated relative to pre-2008 levels.
Sources
- FFIEC Call Report Schedule RC, Line 1
- Federal Reserve H.8 — Assets and Liabilities of Commercial Banks
See Cash & Due From across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by Cash & Due From, refreshed quarterly within 48 hours of FFIEC release.