The pandemic liquidity buffer is gone — bank cash-and-securities coverage is back where it started

Direct answer

Every $10B+ asset cohort shows the same shape: liquid-asset coverage of the balance sheet surged during the 2020-2021 pandemic-era reserve buildup, peaked around Q2-Q4 2021, then declined steadily through the 2022-2023 rate-hike cycle back to roughly its pre-pandemic level, where it has stayed since. [C04] The $250B+ cohort's median rose from 33.1% to a 46.1% peak and is now at 34.2% — almost exactly where it started a decade ago. This is the real, quantified, bank-level version of the funding-risk narrative the Fed's Financial Stability Report discusses only in system-wide, qualitative terms. [C01]

Key findings

The cycle, cohort by cohort

The pattern is consistent across every size band: a large, temporary liquidity surge driven by the pandemic-era reserve and securities buildup, followed by a multi-year drawdown that tracks the 2022-2023 rate-hike cycle almost exactly. [C04] By 2023, every cohort had given back nearly all of its pandemic-era gain. None has since regained meaningful ground — three years later, liquidity buffers sit close to where they were a decade ago, not meaningfully strengthened by the intervening cycle.

A decade of data shows the pandemic didn't create a new, higher normal for bank liquidity — it created a temporary peak that has since fully unwound.

The same window shows up in a different balance-sheet line too

The 2022-2023 liquidity drawdown documented here happened at the same time OptimaYield's companion report found brokered-deposit reliance spiking across every cohort. [C10] That is not a coincidence of two unrelated metrics moving independently — it is consistent with a single funding-stress episode showing up in two places on the same balance sheets: banks drew down their liquid-asset cushion and reached for wholesale/brokered funding over the same stretch, exactly the kind of joint movement a funding-risk assessment should expect to see together rather than treat as separate facts.

Named-institution trajectories: three different liquidity profiles

• Bell Bank — the sharpest single move in the population: a fall from 19.5% (Q2 2021) to a low of 3.6% (Q4 2022), right at the start of the tightening cycle, with only a partial recovery to 7.4% by Q2 2026. [C05] Still well below its 2021 level five years later.
• Axos Bank — rose from 7.4% (Q1 2019) to a peak of 16.0% (Q3 2024), then declined again to 9.3% by Q2 2026. [C06] A slower, later cycle than the industry-wide 2021 peak, now also reversing.
• Third Federal Savings & Loan Association of Cleveland — persistently the least liquid institution in the entire population, ranging narrowly between 5.1% and 7.5% across the full decade with no discernible trend in either direction. [C07] This looks like a stable, structural feature of this institution's balance sheet, not a new or worsening development.

Why the highest-ratio names don't mean what they might look like

Bank of New York Mellon (72.4%) and State Street Bank & Trust (62.1%) have run the highest liquid-asset ratios among traditional banks throughout the entire 2016-2026 window, not just recently. [C08] Custody and clearing banks hold securities and central-bank reserves as a core part of their business model — safekeeping client assets and settling transactions — not as a defensive liquidity cushion built in response to stress. A high ratio here is a business-model fact, the same way a captive auto-finance bank's high brokered-deposit ratio (documented in OptimaYield's companion report) reflects its business model rather than funding pressure.

Methodology

Reuses OptimaYield's existing, already-validated liquid_assets_ratio metric contract (cash and securities divided by total assets) via the shared deriveValidatedMetrics function, unmodified — confirmed, before use, to return a normal verified value for every filer type checked, including G-SIBs and custody banks (unlike cet1_ratio, which has a real, disclosed gap for advanced-approaches banks since 2020 — see BACKLOG.md). Current-quarter population: every institution in the detailed ($10B+) Call Report layer with a derivable ratio for Q2 2026 (159 institutions). Cohort history reuses the already-computed percentile series in semantic.peer_statistics (42 quarters, 2016-03-31 through 2026-06-30). Named-institution trajectories query each bank's full available history directly. Live queries: scripts/analysis-liquid-assets-population.ts and scripts/analysis-liquid-assets-history.ts.

Limitations and counter-evidence

• This is one layer of funding resilience, not the complete picture. [C09] The Fed's own funding-risk assessment also weighs wholesale-funding reliance, interest-rate risk on the securities book, and NBFI exposure — this ratio measures reported balance-sheet composition alone.
• A low ratio is not, by itself, a risk finding. Third FS&LA of Cleveland's persistently low ratio looks structural, not deteriorating; a full assessment would need to know this institution's business model and funding mix, not just this one number.
• A high ratio is not, by itself, a strength finding either — it can reflect a business model (custody banking) rather than a deliberately built defensive cushion.
• No cause is claimed for any bank's specific move beyond the described coincidence with the brokered-deposit finding, which is offered as a consistent pattern, not a proven causal link.
• Not a frozen snapshot. Figures were pulled live from the production database rather than a versioned, hashed catalog artifact.

Glossary

• Liquid assets — cash, balances due from other institutions, and securities (held-to-maturity and available-for-sale, at carrying value), as reported on Schedule RC.
• Funding risk — the risk that a bank cannot meet its obligations as they come due without incurring unacceptable losses, a central theme of the Fed's semiannual Financial Stability Report.

Related on OptimaYield

• Q2 2026 brokered-deposit reliance — the companion piece this report's cross-reference finding (C10) draws on.
• Q2 2026 uninsured-deposit concentration — this quarter's companion piece on deposit funding structure.
• The bank-profile pages for the named institutions above (not yet linked pending publication approval).

Official sources

• Federal Reserve, Financial Stability Report.