The collapse of Silicon Valley Bank (SVB) led to rapid withdrawals from 22 banks across the United States last year due to panic. According to a report prepared by the New York Federal Reserve, this situation shook customers’ confidence.
Dates of Withdrawals
Customers withdrew significant amounts of cash from unnamed banks on March 10 and March 13, 2023. The newly revised report indicates that some banks lost up to 10% of their assets in a single day.
Withdrawals were primarily executed by large corporate clients. The outflow of large-scale payments from banks occurred more intensively compared to individual customers. Public banks were more significantly affected.
Measures Taken by Banks
These 22 banks resorted to rapid borrowing to meet the cash outflows. Without selling securities, they borrowed from sources such as Federal Home Loan Banks (FHLB), the Federal Reserve’s discount window, and the Bank Term Funding Program. Some banks increased interest rates to attract new customers back.
Thanks to these measures, banks managed to recover their deposit losses by mid-2023. However, this resulted in higher interest expenses. The report highlights that especially on March 10, a significant asset flight occurred from the largest banks with assets exceeding $250 billion.
The actions taken by banks are seen as crucial steps for ensuring market stability. Supporting large banks played a critical role in maintaining the security of the overall financial system.
The collapse of Silicon Valley Bank and the subsequent cash withdrawals serve as an important example of how financial institutions respond in times of crisis.
