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 made massive withdrawals from the unnamed banks on March 10 and 13, 2023 – with some lenders losing up to 10% of their assets in a single day, the newly revised report said.
The runs were mainly driven by large institutional depositors rather than retail customers, with a small number of large payments leaving the affected banks.
Listed banks were hit harder, suggesting that public information such as stock prices and market capitalizations helped influence depositor behavior.
“When analyzing intraday payments, we find that outflows from run banks are highly concentrated after the Federal Deposit Insurance Corporation (FDIC) announced SVB’s bankruptcy, consistent with information spillovers from the announcement…
We can show that active savers are disproportionately fleeing to the largest banks with assets over $250 billion, especially on Friday, March 10.”
The 22 lenders in question have stemmed the outflow by borrowing heavily rather than selling securities, with many lenders borrowing from Federal Home Loan Banks (FHLBs), as well as the Federal Reserve’s discount window and the Bank Term Funding Program.
Some banks also raised deposit rates to attract new deposits, allowing them to recoup deposit losses by mid-2023, although at the cost of higher interest charges.
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