The collapse of Silicon Valley Bank (SVB) triggered a wave of bank runs at 22 US lenders last year, according to an under-the-radar report from the New York Federal Reserve.
Depositors pulled cash from the unnamed banks en masse on March 10th and March 13th, 2023 – with some lenders losing up to 10% of their assets in a single day, says the recently revised report.
The runs were primarily driven by large institutional depositors and not retail customers, with a small number of large payments exiting the affected banks.
Publicly traded banks were more affected, suggesting public information like stock prices and market caps helped influence depositor behavior.
“Analyzing payments intraday, we find that outflows from run banks are highly concentrated after the Federal Deposit Insurance Corporation (FDIC) announced the failure of SVB, consistent with information spillovers from the announcement…
We can show that running depositors disproportionately flee to the largest banks with assets over $250 billion and especially do so on Friday, March 10th.”
The 22 lenders in question stemmed the outflows by borrowing heavily and not by selling securities, with many lenders taking out loans from Federal Home Loan Banks (FHLBs), as well as the Federal Reserve’s discount window and Bank Term Funding Program.
Some banks also increased deposit rates to attract new deposits, which allowed them to recover the deposit losses by mid-2023, although this came at the cost of higher interest expenses.
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