Update: Since March 12th, we have found out that the Federal Reserve, the FDIC, and the US Treasury have moved in concert to backstop all deposits of Silicon Valley Bank fully.
Contextually, various regulators have been promising that this is not a bailout. In some sense, the government's actions are just accelerating the typical process. About 2/3 of all bank failures lead to depositors eventually getting back 70%+ of their deposits. The below is a histogram of typical % fund recovered (to date) across all bank failures.
But in the context of historical data, the full return of deposits within a single business day of failure is relatively unprecedented.
Original: When Silicon Valley Bank was closed on Friday, March 10th, pretty much everyone we knew was shocked. But once the shock worse off, we realized how little we knew about what was to come:
- $250,000 of insured deposits would become available nearly immediately, expected before Monday 3/13 per press release
- The remainder of deposits we had no clue about, with an unhelpful “The FDIC as receiver will retain all the assets from Silicon Valley Bank for later disposition. Loan customers should continue to make their payments as usual.”
We are not finance experts, nor banking historians… but we are data people so we went searching for datasets. On the FDIC website, there is a dataset about receivership dividends paid out for past failed banks: https://closedbanks.fdic.gov/dividends/
We brought that into Einblick for exploration with Python, SQL, and Charts. You can copy the scraping code, or download the csv for yourself here:
Data Comments
We mostly only cared about receivership dividend payments that ocurred within the 1st year of payback, because as startups, 2 years from now may as well be forever.
Second, we restricted to only those receiverships paying eventually back more than 70% by the latest data point (or by the end). Since Silicon Valley Bank seems to have more assets than deposits on paper, we did not want to conflate data points from banks without the ability to repay majority of claimants. The consensus is that they had more difficulty in liquidity than anything else.
Observations
Charts and other exploration can be found here – you can clone our workspace and explore yourself here: https://app.einblick.ai/?w=640b842c862a835ef8af27c8&b=821028c1-bce3dfc5
Observation 1: It was historically very unlikely that (85%+) all deposits funds were returned in the first two months, with only 6 of 542 bank failures returning that percentage.
Observation 2: It has been, however, likely that the majority (50-60%) of total funds can be returned in the first two months.
Darker colors indicate more bank failure observations in that range - the biggest cluster is ~65% + ~40 days
Color of dots indicate what % depositors received in the end - green ones eventually were made whole.
Observation 3: There are not a ton of changes to the % paid out early post-failure, even if most observations are during the Late 2000’s Recession. The % paid within the first 60 days stays roughly around 60% over time.
% paid in the first 60 days is pretty consistent over time; it's unlikely that there are huge changes to this pattern observed in observation 2.
Observation 4: Forever isn’t just a word, incremental payments trickle in
While big moves happen early on, it took a long time for failures to fully resolve and typical bank failures were very likely to have ~5-10% of funds trickle in past the 3-year mark.
The following x-axis is about incremental % paid (rather than the total until that date) distributions.
Big % incremental distributions (e.g. 50% / 60%) happen early, but lots of incremental distributions past the 3-5 year mark even.
Observation 5: Rare Events- Advanced Dividends
The data does not suggest advanced dividends are common, but there were a few cases of this special receivership dividend that happened 2-4 days after bank failure and returned 50-65% of funds. It is a conservative estimate by the FDIC of the value of dividends and it is disbursed immediately.
(Definition here: https://www.fdic.gov/bank/historical/reshandbook/glossary.pdf)
Concluding Remarks
Again, we cannot say for sure how the funds disbursed are rolled out or allocated, but hopefully this should set some ground truth expectations for the total pool of deposits users at Silicon Valley Bank.
If you have comments or feedback, please let us know. Please consult an expert or lawyer and do not rely on our distributions for operating capital estimates.