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SVB Collapse Impacts 'Super-Regional' Banks

According to a recent study by New York Fed researchers, the collapse of Silicon Valley Bank (SVB) led to deposit withdrawals primarily from 30 "super-regional" banks with assets in the $50 billion to $250 billion range.

SVB logo
SVB logo

Stability in Community and Smaller Regional Banks

Contrarily, community and smaller regional bank deposits remained relatively stable during March. The largest, systemically important firms gained the deposits that left the super-regional group.

Focused Problems in Select Institutions

The NY Fed study indicates that the issues were concentrated in a specific set of institutions rather than causing a widespread run on bank deposits after the failures of SVB and Signature Bank in March.

Smaller Institutions Remain Unaffected

Banks with assets up to $100 billion experienced little impact, with the smallest institutions seeing almost no change in deposits post-mid-March events. These smaller firms typically have higher insured deposits through the Federal Deposit Insurance Corp (FDIC).

FDIC's Plan for Replenishing Deposit Insurance Fund

The FDIC announced its plan to replenish its deposit insurance fund after absorbing at least $16 billion of losses from recent failures. The replenishment assessment will mainly focus on banks with $50 billion or more in assets, while those with less than $5 billion will pay nothing.

Analyzing the Impact of Recent Bank Failures

The NY Fed study aims to understand the effects of recent bank failures and how Federal Reserve interest rate increases since March 2022 have altered the financial landscape. Nearly $950 billion in deposits left the banking system before SVB's failure, as customers sought better returns in the rising interest rate environment.

Crisis Dynamics Shift from Super-Regional Banks

In mid-March, crisis-like dynamics involved a near dollar-for-dollar shift of money from super-regional banks to even larger institutions.

Regional Bank Stability Remains a Concern

First Republic Bank's recent FDIC receivership and sale to JPMorgan highlights the ongoing concern about regional bank stability.

Diminishing Signs of a Festering Crisis

Emergency borrowing from Fed facilities has declined, and the study concludes that much of it was "precautionary." Super-regional banks borrowed the most, but banks of all sizes tapped Fed and other facilities, indicating a demand for precautionary liquidity buffers across the banking system.