Key Takeaways
- FDIC staff said depositors associated with the digital asset sector and active escrow depositors were more likely to run.
- Uninsured exposure intensified pressure, with more than 99.5% of Signature active escrow balances uninsured.
- Wire activity showed how quickly mobile funds left stressed banks during the 2023 runs.
Digital Asset Depositors Moved Faster During Bank Stress
The Federal Deposit Insurance Corporation (FDIC) released a report last week, detailing deposit flows at Silicon Valley Bank (SVB), Signature Bank (SBNY), and First Republic Bank (FRB). The staff study stated that depositors associated with the digital asset sector, along with active escrow depositors, were more likely to run during the 2023 failures.
Signature Bank had active escrow deposits that included pooled customer funds for investment-related companies, including firms facilitating digital asset investment, and banking-as-a-service financial technology companies. Active escrow deposits made up 13% to 15% of SBNY’s deposits before the run. The FDIC explained that beneficial owners of active escrow funds most likely had the ability to move funds quickly.
FDIC Chairman Travis Hill said:
“This study provides a highly detailed account of deposit flows during the fastest bank runs in U.S. history.”
In 2023, SVB failed on March 10 after depositors began running on March 9. SBNY failed on March 12 after runs started on March 10. FRB remained open under stress until May 1, when regulators closed the bank and JPMorgan Chase Bank acquired it. The FDIC tied all three failures to broad-based deposit runs.
Active escrow deposits at SBNY plummeted 88% between March 7 and March 17, 2023. The category dropped 83% in two business days, the largest percentage decline among SBNY’s primary deposit types. FRB also held active escrow deposits tied to investment-related companies, including sweep accounts and cash management accounts. Those balances fell 52% during the same period.
Active Escrow Balances Carried Uninsured Risk
Researchers estimated that virtually all active escrow deposits were uninsured at SBNY and FRB. More than 99.5% of SBNY’s active escrow deposits were uninsured. At FRB, the uninsured share was 99%. That exposure placed digital asset-related and fintech-linked balances inside the broader pattern of uninsured deposit flight across the failed banks.
Uninsured deposits fell 68% at SBNY, 62% at SVB, and 47% at FRB between March 7 and March 17, 2023. Excluding the $30 billion consortium deposit to FRB on March 16, FRB’s uninsured deposits dropped 71%. Fully insured retail depositors generally did not run before the failures, the FDIC release said. The split suggested how insurance status shaped depositor behavior. FDIC wrote:
“Depositors associated with the digital asset sector and depositors with active escrow deposits were also more likely to run.”
Wire transfers carried most net outflows during the runs. SBNY depositors submitted $23.3 billion in outbound wire requests on March 10, 2023, with $2.2 billion left incomplete that day. On March 13, Signature Bridge Bank’s wire system received and completed $19 billion in outbound transfer requests. The report framed those transfers within a broader run pattern driven by large, mobile balances.
