Distributed ledger, crypto, not figuring much into banks’ growth, development plans for next two years, survey results indicate

Distributed ledger technology (DLT) and crypto-related products and services are either a low or not a priority for bank growth and development over the next two years, two thirds of banks told the Federal Reserve in a survey, results of which were issued Friday by the agency.

About one-quarter of the banks responding to the Fed’s Senior Financial Officer Survey (SFOS), however, said adopting the DLT and crypto products are a medium or high priority.

The agency said its Senior Financial Officer Survey (SFOS) – conducted in May this year – is performed annually to gather views systematically from several banks on expectations for balance sheet management in the months ahead, reserve management experiences in recent months, experiences and expectations for pass-through of the Federal Reserve policy rate to interest on deposits, and their expectations about deposit levels. In addition, the Fed said, the survey gathered views on bank’s expectations for investment in digital innovation.

“Digital innovation” was one of three areas of the survey results highlighted by the Fed. The others were reserves and balance sheet management and deposit rates and balances. However, in other areas of digital innovation, the survey results showed:

  • When the period in the question about adoption of DLT and crypto services was shifted to the next two to five years, the responses were more spread out, the Fed said. Respondents were roughly evenly split with most citing that it was not a priority or a low priority for their bank, or citing that it was a medium to high priority for their bank.
  • Banks do not see DLT and crypto as having large effects on liquidity management, with most respondents reporting not important to moderately important for the next 2-5 years and 5-10 years.
  • Some respondents noted that their bank is actively monitoring the DLT and crypto situation and will adapt to the landscape as needed.

Regarding balance sheet management, among other things, more than half of respondents reported that their bank does not plan to take actions to increase or decrease the size of its balance sheet through the remainder of the year, and the majority of respondents indicated that their bank expects its balance sheet size to remain roughly unchanged over that same period.

On deposit rates and balances, the Fed said bankers’ responses indicated (among other things) that they had passed through only a few basis points of the 25 basis point increase in the target range for the federal funds rate adopted by the Federal Open Market Committee (FOMC) in March to their customers. However, looking ahead to the remainder of the year, the Fed said respondents indicated a wider variation in the expected amount of pass through of potential increases in the target range.

Federal Reserve Board releases results of survey of senior financial officers at banks about their strategies and practices for managing reserve balances