US banks have over $1 trillion in uninsured deposits. The signature takes pride of place.

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The US government shut down Signature Bank on Sunday. On Friday, regulators shuttered Silicon Valley Bank, causing panic among startups and VCs. Both banks had a huge amount of customer deposits that were not FDIC insured. There are others. Something is loading.

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A second bank was closed on Sunday by the US government. This time it was Signature Bank.

What do this financial institution and Silicon Valley Bank have in common? They both had huge amounts of customer deposits that were not FDIC insured.

The FDIC insures US bank deposits up to $250,000 per account to prevent runs and bank failures. The demise of SVB, and now the collapse of Signature Bank, has pushed this system to breaking point.

On Sunday, the US Treasury, Federal Reserve and FDIC said in a joint statement that all SVB depositors would be reinstated on Monday. Authorities completely ignore the $250,000 insurance limit. SVB had $173 billion in total deposits and about 88% of that amount was uncovered.

That’s over $150 billion in additional deposits that the FDIC suddenly decided to insure.

The authorities are granting the same special exemption to Signature Bank, so all depositors will also be compensated there. Signature had $89 billion in total deposits, and 90% of that was non-FDIC insured. That’s another $79 billion that this agency takes on its shoulders.

“In insuring all deposits at SVB and Signature, regulators deemed the risk of cascading effects on other regional banks and the broader economy to be greater than the moral hazard of raising FDIC limits” , said Rich Falk-Wallace, CEO of the data analytics company. Arcana and a former hedge fund portfolio manager Citadel.

In the case of SVB and Signature, the high percentage of uninsured deposits is partly explained by the relatively small number of customers with large balances. At SVB, for example, Roku revealed that it had almost $500 million in deposits in the bank, well exceeding the $250,000 guarantee. Banks with a much higher number of retail customers would generally have a much lower average balance and a much higher percentage of insured deposits.

Insider analyzed the regulatory filings of 15 major US banks to see how much uninsured deposits were available at the end of 2022. The answer is well over $1 trillion.

One thing to note on this list is the presence of First Republic, which saw its stock price plummet last week as fears of contagion spread.

In a regulatory filing on Friday, First Republic said the average deposit size held by its customers was $200,000, less than the FDIC-assured limit of $250,000, while its average business account held $500,000. .

“First Republic’s liquidity position remains very strong,” the bank said. “Sources beyond a well-diversified deposit base include more than $60 billion of available and unused borrowing capacity at the Federal Home Loan Bank and the Federal Reserve Bank.”

Here is a ranking, based on the percentage of total deposits that are not FDIC insured:

Note: Data at the end of 2022.

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