Depositors with substantial uninsured funds – especially the largest depositors — were far more likely to flee three failing banks in 2023 than fully insured depositors, who mostly did not run, according to a study published Thursday by the federal bank deposit insurance agency.
In a release, the Federal Deposit Insurance Corp. (FDIC) said its study uncovered the depositors’ behavior in the 2023 failures of Silicon Valley Bank (SVB) of Santa Clara, Calif., Signature Bank (SBNY) of New York, N.Y., and First Republic Bank (FRB) of San Francisco, Calif.
According to the agency, the study analyzes the “day-by-day” depositor behavior around the time the banks were closed and placed into FDIC receivership. Prior to failure, all three banks experienced deposit outflows that were unprecedented in their size and speed, the agency noted.
“Prior to failure, all three banks experienced deposit outflows that were unprecedented in their size and speed,” the FDIC said.
The agency said its study found depositors with “substantial uninsured funds were far more likely to run while fully insured retail depositors generally did not run prior to the banks’ failures.”
Further, the agency said, the largest depositors at all three banks were “significantly more likely to run than other uninsured depositors, withdrawing all or nearly all their deposits across their accounts, including accounts that may have been used for business operations.”
Those withdrawal patterns held true for certain categories of large depositors that maintained large insured balances on a pass-through basis, the FDIC said.
FDIC Releases Staff Study of Deposit Flows at Three Failed Banks in Spring 2023
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