Forty-five percent of organizations moved deposits to large banks, seeking safety in systemically important financial institutions, according to the 2024 Association for Financial Professionals (AFP) Liquidity Survey, underwritten by Invesco. To further reduce counterparty risk, 35% of organizations diversified their deposits among a greater number of banks.

Forty-four percent of treasury professionals report an increase in their organizations’ cash holdings within the U.S. in the past 12 months (through March 2024). This figure is up 8 percentage points from 2023 (36%). Thirty-one percent of respondents predict that their companies’ current cash and short-term investment holdings will increase through the third quarter.

Additional key findings from the 2024 AFP Liquidity Survey include:

• Larger organizations (>$1 billion annual revenue) consider safety a key objective of their investment policy more often (69%) than smaller organizations (58%).
• Banks continue to be major depositories for companies’ U.S.-based cash and short-term investment holdings. The percentage of cash and short-term investments maintained at banks is 47%, the same level as in 2023. However, allocations to Treasury securities (12%) increased by 5% over the same time period.
• Over two-thirds of respondents reported that their companies’ earnings credit rate (ECR) did not increase as rapidly as rising interest rates, with non-investment-grade companies most impacted (75%).
• When selecting a bank, the most important determinant for treasury professionals is the overall relationship with the bank, cited by 89% of respondents. This figure is up 6 percentage points from 2023 and surpassed both credit quality and counterparty risk, highlighting the value placed on relationships with banking partners.
• Money market fund reform has had minimal impact on corporate investing. Four percent of current allocations are in Prime/diversified money funds. With the mandatory liquidity fee requirement going into effect on October 2, 2024, 32% of those who have exposure to Prime funds are taking a “wait and see” approach.

“The results of the AFP Liquidity Survey demonstrate the lasting impact of the 2023 banking crisis on an organization's liquidity management,” said Jim Kaitz, President & CEO of AFP. “As treasury professionals continuously work to safeguard their organizations, strong relationships with banking and money fund partners will remain critical to navigating the evolving economic environment.”

“As investors re-evaluate their liquidity needs, money market funds continue to serve as a safe haven,” continued Laurie Brignac, CIO and Head of Invesco Global Liquidity. “We’re pleased to partner again with APF to sponsor the Liquidity Survey, helping treasury professionals benchmark trends and gain valuable insights into how their peers are navigating markets.”

The 2024 AFP Liquidity Survey was conducted in March 2024 and received responses from 239 treasury professionals from organizations of varying sizes representing a broad range of industries.

Read the full findings from the 2024 AFP Liquidity Survey.

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5/29/2024