FDIC: Digital-asset, escrow deposits sped 2023 bank runs
FDIC analysis finds digital-asset-related and active escrow accounts drove rapid outflows in March 2023; Signature Bank escrow balances fell 88% and most escrow funds were uninsured.
The Federal Deposit Insurance Corporation released a deposit-flow analysis last week covering Silicon Valley Bank, Signature Bank and First Republic during the March 2023 runs. Silicon Valley Bank failed on March 10 after runs began on March 9. Signature Bank failed on March 12 after runs began on March 10. Regulators closed First Republic on May 1 and JPMorgan Chase acquired the bank.
The FDIC found that depositors linked to the digital asset sector and accounts labeled as active escrow contributed to the rapid outflows. At Signature, active escrow deposits-pooled customer funds used by investment-related firms, digital-asset service providers and banking-as-a-service fintechs-represented about 13% to 15% of deposits before the run. Those balances fell 88% between March 7 and March 17, 2023, and dropped 83% in two business days, the largest percentage decline among the bank’s primary deposit categories. First Republic’s active escrow balances declined 52% over the same period.
The study reported that nearly all active escrow balances were uninsured. More than 99.5% of Signature’s active escrow deposits and roughly 99% of First Republic’s active escrow deposits sat above the FDIC insurance limit. Across the three banks, uninsured deposits declined 68% at Signature, 62% at Silicon Valley Bank and 47% at First Republic between March 7 and March 17. Excluding a $30 billion consortium deposit to First Republic on March 16, the bank’s uninsured deposits fell 71% in that window.
Wire transfers accounted for most of the net outflows identified in the report. On March 10, Signature depositors submitted $23.3 billion in outbound wire requests, with $2.2 billion incomplete that day. On March 13 the bridge bank that replaced Signature’s operations processed and completed $19 billion in outbound transfer requests. The FDIC described these movements as large, mobile balances exiting institutions under stress.
FDIC Chairman Travis Hill described the study as “a highly detailed account of deposit flows during the fastest bank runs in U.S. history.” The agency’s analysis ties rapid outflows of large, uninsured and mobile deposits to the stress at the three banks and the subsequent failures and resolution actions.
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