Or they diversify away from short-term deposits and marketable instruments towards better remunerated – but riskier and less liquid – instruments. To the extent these instruments are outside M3, this dampens the growth in the broader monetary aggregate.
For example, banks are tending to avoid customers, such as money transmitters and check cashers, who present perceived heightened risks. Yet the closing of accounts for these types of businesses is effectively a denial of banking services to many categories of legitimate customers.