CFO Slice

A new Federal Deposit Insurance Corp. (FDIC) report found that large, sophisticated uninsured depositors were the primary drivers of the rapid bank runs that led to the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in 2023. The study showed that the banks relied heavily on concentrated uninsured business deposits, making them vulnerable to fast-moving digital withdrawals conducted largely through wire transfers. Between March 7 and March 17, 2023, Silicon Valley Bank and Signature Bank each lost more than half of their deposits, while First Republic would have lost nearly 54% without a $30bn industry-backed cash infusion. The FDIC found that the largest depositors were significantly more likely to withdraw funds, even after accounting for deposit insurance coverage and account types. Many business customers also removed balances from accounts that were likely insured, including escrow and operational accounts. By contrast, fully insured retail depositors largely remained stable during the crisis. FDIC Chairman Travis Hill said the findings highlight the need for regulators to develop a more sophisticated understanding of depositor behavior in an era of digital banking and rapid online fund transfers.