- A major Bank for International Settlements review finds traditional factors like deposit insurance and bank solvency still dominate deposit stability, not just withdrawal speed.
- The 2023 bank runs were characterized by extreme concentrations of uninsured deposits, often over 90%, from specific business sectors.
- Technology amplified the crises through faster information spread and depositor coordination rather than the mechanics of fund movement.
- While instructive, the analysis does not address the future impact of stablecoins or tokenized money market funds on bank deposits.
A new Basel Committee working paper provides a crucial reassessment of what drives bank deposit stability following the 2023 turmoil. The international review concludes traditional risk factors, not new technology, remain the primary drivers of depositor behavior. However, it acknowledges that digital tools accelerated the runs by enabling faster information and coordination.
Consequently, the failures of Silicon Valley Bank (SVB) and Signature Bank shared four notable characteristics. These included extreme concentrations of uninsured deposits, with SVB at 94% and Signature at 90%, alongside sector concentration and large unrealized losses. Meanwhile, Silvergate Bank is often incorrectly grouped with these regulatory seizures.
The paper clarifies Silvergate undertook a voluntary wind down after the collapse of FTX. This critical distinction matters for drawing accurate lessons from the period. The authors note large corporations have moved funds electronically at speed since the late 1970s.
Therefore, the argument about withdrawal speed is less compelling than it initially appears. For digital asset firms and their banks, the findings are instructive on historical dynamics. Yet the paper’s scope does not cover stablecoins or tokenized money market funds. Consequently, their longer-term impact on traditional deposits remains an open question for future analysis.
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