The Federal Deposit Insurance Corporation (FDIC) released a study that examined deposit flows at three banks that failed in the spring of 2023.
The report, called “Dissecting Depositor Flight: An Analysis of the Spring 2023 Bank Failures,” looked at depositor behavior around the time that Silicon Valley Bank (SVB), Signature Bank (SBNY), and First Republic Bank (FRB) were closed and placed into FDIC receivership.
Prior to their failure, all three banks experienced deposit outflows that were unprecedented in their size and speed.
“I have long believed that regulators need to develop a more sophisticated understanding of deposit behavior. 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,” FDIC Chairman Travis Hill said.
Among other things, the study found that 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 study suggested that other considerations are important as well. For example, 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. This includes accounts that may have been used for business operations. Additionally, these withdrawal patterns also held true for certain categories of large depositors that maintained large insured balances on a pass-through basis.