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Why failed Silicon Valley Bank was an outlier
AxiosAt 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.
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.
