Mar 14, 2023 - Economy

Size matters when it comes to bank failures

Data: FDIC; Note: A bank failure is defined as when regulators close a bank; Chart: Madison Dong/Axios Visuals
Data: FDIC; Note: A bank failure is defined as when regulators close a bank; Chart: Madison Dong/Axios Visuals

To see two bank failures in one year, as we have thus far in 2023, isn't that unusual. It's the dollar amounts that are eye-popping.

Why it matters: The size of Silicon Valley Bank is likely making it more difficult for regulators to find a buyer, which would usually be the ideal scenario for regulators cleaning up after a collapse.

  • There aren't many financial institutions large enough to acquire a big regional bank with more than $50 billion in assets, current FDIC chair Martin Gruenberg said in remarks at Brookings in 2019

The big picture: The two bank failures of 2023, Signature Bank and Silicon Valley Bank, had combined total assets of $319.36 billion.

  • Most bank failures are way smaller. Over 98% of banks that have failed since 2007 had assets under $10 billion, explained Gruenberg back then.
  • Of note: A failed bank is one that's been taken over by regulators — so Silvergate Bank, which announced last week that it's liquidating, doesn't count.

What to watch: The FDIC is trying again to auction off SVB after a similar effort failed over the weekend.

  • This time the agency has a carrot to offer acquirers. The Wall Street Journal reports that regulators can now provide a would-be buyer "deal-sweeteners such as loss-sharing agreements."
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