Mar 15, 2023 - Economy

Why failed Silicon Valley Bank was an outlier

Data: S&P Global Market Intelligence; Chart: Axios Visuals
Data: S&P Global Market Intelligence; Chart: Axios Visuals

At most banks, roughly half of all deposits are uninsured. Silicon Valley Bank was not most banks.

By the numbers: At the end of the fourth quarter, a whopping 93.9% of its domestic deposits were uninsured, per an analysis from S&P Global. Signature Bank, which also failed last week, had a similarly high 89.7% ratio of uninsured deposits.

Why it matters: A bank whose deposits are insured by the FDIC is largely immune from a bank run. After all, insured deposits are safe even if the bank fails.

  • Conversely, a bank where the deposits are overwhelmingly uninsured is one where they are all likely to flee somewhere safer at the first sign of trouble — especially if they come from an industry like venture capital that is known for its herd mentality.

The bottom line: Not all deposits are equal, from a bank's point of view. Insured deposits are incredibly sticky. Uninsured deposits, not so much.

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