Big depositors were more likely than smaller ones to run at signs of trouble before three major banks failed in early 2023, the Federal Deposit Insurance Corp. said this week.
Depositors with “substantial uninsured funds” were much more likely to pull their deposits than those with fully insured deposits of $250,000 or under, whom “generally did not run” prior to the banks’ failures, according to “Dissecting Depositor Flight: An Analysis of the Spring 2023 Bank Failures,” an FDIC report.
Transaction-level data collected from depositors of Silicon Valley Bank, Signature Bank and First Republic Bank, which all failed in the late winter and early spring of 2023, found that the largest depositors at all three banks were much more likely to run, too, than other uninsured depositors, withdrawing all or nearly all of their money, including from business accounts.
The “top depositor” threshold ranged from $6 million at First Republic to $16 million at Signature Bank to $49 million at SVB, the FDIC said.
Uninsured deposits comprised the bulk of deposits at the three banks – roughly three-quarters of all deposits at First Republic and Signature, and 94% at SVB. And all three banks had concentrated deposits among a relatively small number of depositors prior to deposit runs, the FDIC found: Signature’s top depositors held 62% of total deposits, while First Republic’s top depositors held 50% and SVB’s top depositors held 39%.
“I have long believed that regulators need to develop a more sophisticated understanding of deposit behavior,” FDIC Chair Travis Hill said in a prepared statement on the analysis.
“This study provides a highly detailed account of deposit flows during the fastest bank runs in U.S. history and deepens our understanding of run dynamics in today’s banking environment,” he said.
The bulk of the runs at all three banks occurred between March 9 and March 14, the FDIC found. SVB lost 50% of the deposits it had on March 6, while Signature lost 50% of its March 6 deposits and First Republic lost 47%.
Of the banks’ top depositors, roughly two-thirds or more ran, the FDIC found: 74% at SVB, 65% at Signature and 74% at First Republic.
