Deposit withdrawals from U.S. banks following the collapse of Silicon Valley Bank were concentrated in around 30 "super-regional" institutions in the $50 billion to $250 billion range, similar to SVB, New York Fed researchers concluded in a newly released study.
Deposits among thousands of "community and smaller regional banks... were relatively stable by comparison" during March, the researchers found, with the largest, systemically important firms receiving the deposits that left the super-regional group.
Though there were concerns about a broader run on bank deposits after the failure of SVB on March 10 and Signature Bank on March 12, the NY Fed study points to what Fed officials themselves seemed to conclude early on - that the problems were focused in a discrete set of institutions.
There were fears banking sector weakness might touch off a wave of mergers that would wipe out smaller institutions - to the potential detriment, for example, of small business lending.
But even banks up to $100 billion in size "were relatively unaffected," with the smallest institutions seeing virtually no change in deposits after the events of mid-March. Smaller firms tend to have higher levels of their deposits insured by the Federal Deposit Insurance Corp. The high level of uninsured deposits at SVB was a factor in its collapse.
The report's release coincided with the FDIC announcing on Thursday its plan for replenishing its deposit insurance fund, which absorbed at least $16 billion of losses from the recent failures. The FDIC plans to focus most of the replenishment assessment on banks with $50 billion or more in assets, while those with fewer than $5 billion of assets would pay nothing.
The NY Fed study is the latest effort to understand the impact of recent bank failures, and more broadly how Federal Reserve interest rate increases since March, 2022, have reshaped the financial landscape. According to the study, roughly $950 billion in deposits left the banking system in the year before SVB failed, as customers sought better returns in the rising interest rate environment, with the outflow spread proportionately across all banks.
But what seemed to be crisis-like dynamics in mid-March turned out to involve a nearly dollar for dollar shuffle of money from the super-regional banks to even larger institutions.
Concern about the stability of regional banks continues, with First Republic Bank taken into FDIC receivership and sold to JPMorgan this month.
Evidence of a festering crisis, however, seems to have diminished. 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, which "suggests demand for precautionary liquidity buffers across the banking system, not just among the most affected institutions."
