Decisions by the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) on the future of Silicon Valley Bank could affect regional banks across the United States, putting trillions of dollars at risk of a bank run, he claimed former Bridgewater executive and CEO of investment firm Unlimited, Bob Elliot.
In a Twitter thread on March 11, Elliot claimed that almost a third of deposits in the United States are in small banks, and about 50% are uninsured. “The FDIC insures the small deposits of all banks in the United States, but it only covers about $9 million of the nearly $17 million in deposits in circulation. […] Under the hood, the coverage rate is about 50% at most institutions, while at credit unions it’s higher (not above).”
Fed/FDIC decisions on SVB determine whether they risk a bank run trillions of dollars in size.
1/3 of US deposits are in small banks and ~50% are uninsured. Haircutting SVB depositors will raise sensitive questions about holding deposits at any small bank, risking a broader run. pic.twitter.com/RTCqekAQX4
— Bob Elliott (@BobEUnlimited) March 11, 2023
America’s small banks had $6.8 trillion in assets and $680 billion in capital as of February 2023, according to Fed data. Given this scenario, a failure at the tech bank would put “risk of a run on thousands of small banks,” further turning the SBV situation into a large-scale problem, Elliot said.
Elliot’s comments were among many seen on social media over the weekend as fear surrounded the Californian bank’s future. A petition created by YCombinator CEO Garry Tan claims that nearly 40,000 of all Silicon Valley Bank depositors are small businesses. “If swift action is not taken, more than 100,000 people could soon lose their jobs,” says the document urging regulators “to step in and implement support for depositors.”
According to In a Bloomberg story citing people familiar with the matter, the FIDC and the Federal Reserve are discussing the creation of a fund to support deposits for troubled banks. The fund is a response to the bankruptcy of SVB and is intended to reassure depositors and reduce panic.
Silicon Valley Bank was one of the 20 largest banks in the United States and provided banking services to many pro-crypto venture capital firms. The Crypto VC Firms Assets Totaled Over $6 Billionincluding $2.85 billion from Andreessen Horowitz (a16z), $1.72 billion from Paradigm and $560 million from Pantera Capital.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.