- The collapse of Silicon Valley Bank impacted $175 billion in deposits and $209 billion in assets
- Signature Bank failed just two days later, making it the third-largest meltdown ever and Silvergate Capital has also announced it would wind down its business
The Largest Bank Failures in Modern History
Silicon Valley Bank cratered at warp speed—and within the last week, two other institutions have folded as well.
One of these, Signature Bank, is the third-largest bank casualty in U.S. history. The other is Silvergate Capital, a bank that announced it would close operations and return assets to depositors. This bank was highly exposed to the crypto sector.
While emergency measures were taken by U.S. banking regulators to stem contagion risk, many are left wondering what could happen next. With data from the Federal Deposit Insurance Corporation (FDIC), the above graphic charts over 500 bank failures since 2001.
Top 20 Bank Failures Since 2001
The last time a major banking collapse took place, a flood of bank shutdowns followed.
After banks reported billions in subprime-mortgage losses in late 2007, sentiment began to shift. As losses snowballed in 2008, it triggered a run on shadow banks—institutions that aren’t regulated like banks but perform similar actions.
Back then, banks and shadow banks were holding foreclosed mortgages as collateral. At the time, it was also difficult to determine the value of these assets. A credit crisis spurred a wave of bank collapses.
Here are the top 20 bank failures over the last two decades:
|1||Washington Mutual Bank||Sep 2008||$188.0B||$307.0B|
|2||Silicon Valley Bank||Mar 2023||$175.4B||$209.0B|
|3||Signature Bank||Mar 2023||$88.6B||$110.4B|
|4||Colonial Bank||Aug 2009||$20.0B||$25.0B|
|5||IndyMac Bank||Jul 2008||$19.1B||$32.0B|
|6||Guaranty Bank||Aug 2009||$12.0B||$13.0B|
|7||Downey Savings and
|9||AmTrust Bank||Dec 2009||$8.0B||$12.0B|
|10||Corus Bank||Sep 2009||$7.0B||$7.0B|
|11||California National Bank||Oct 2009||$6.2B||$7.8B|
|12||First Federal Bank of California||Dec 2009||$4.5B||$6.1B|
|13||R-G Premier Bank of Puerto Rico||Apr 2010||$4.3B||$5.9B|
|14||Doral Bank||Feb 2015||$4.1B||$5.9B|
|15||Park National Bank||Oct 2009||$3.7B||$4.7B|
|16||Franklin Bank||Nov 2008||$3.7B||$5.1B|
|17||First NBC Bank||Apr 2017||$3.5B||$4.7B|
|18||Amcore Bank||Apr 2010||$3.4B||$3.8B|
|19||Silverton Bank||May 2009||$3.3B||$4.1B|
|20||Frontier Bank||Apr 2010||$3.1B||$3.5B|
The banks collapsing in more recent days have been holding U.S. Treasuries as collateral. These have declined in value as interest rates have spiked. Their customer bases are also concentrated, which decreases diversification. Just as Silicon Valley Bank served a niche clientele of venture-backed tech startups, Silvergate Capital worked with mainly high-risk crypto firms.
As these banks poured deposits in long-term bonds when interest rates were historically low, it was a reflection of faulty risk management and the assumption that interest rates would remain at these levels.
What Happens Now?
U.S. banking regulators have shown that they’re serious about preventing any future fallout.
Together, the Federal Reserve, U.S. Treasury, and the FDIC took emergency measures to enable all Silicon Valley Bank and Signature Bank depositors access to their funds on Monday March 13. This was after an auction over the weekend that resulted in no buyer.
JPMorgan Chase, Morgan Stanley, and Royal Bank of Canada are among banks that had initially shown interest but stepped back after conducting due diligence. A second auction is now being scheduled.
Regulators took swift action to repay depositors, citing how Silicon Valley Bank and Signature also brought about a “similar systemic risk exception”. While both banks were not found on the Financial Stability Board’s list of systemically important banks, regulators took action.
Interestingly, the Federal Reserve did an assessment of banks that would pass a recession stress test last year. Both Silicon Valley Bank and Signature Bank were not found on the list (seen on pg. 5).
Where does this data come from?
Source: Federal Deposit Insurance Corporation, March 2023.
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