Report: 10 banks most at risk of uninsured deposits

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Higher levels of uninsured deposits at Silicon Valley Bank and Signature Bank helped. But it turns out they’re not the only ones.


Ten banks owned by US-listed financial companies – including Bank of New York Mellon ,bk, Northern Trust ,NTRS) And ,C) — A new analysis by S&P Global Market Intelligence says the highest percentage of household deposits are among those who are uninsured. Failed Silicon Valley Bank and Signature Bank are two of the 10 firms identified by S&P Global Market Intelligence.

Insurance from the Federal Deposit Insurance Corporation, or FDIC, guarantees bank deposits up to $250,000 per person per year. Some bank customers, for various reasons, leave more than $250,000 on deposit in banks. And the FDIC doesn’t officially insure such excess deposits. Such exposure scared off Silicon Valley Bank customers as depositors demanded their money back. On Large scale In a classic bank run.

“Silicon Valley Bank and Signature Bank had the highest proportion of estimated uninsured home deposits across the industry,” David Hayes of S&P Global Market Intelligence said in a report.

Looking at uninsured deposits of banks

The events at the Silicon Valley bank brought to light the unanticipated risk for banks with such high levels of uninsured deposits. It didn’t take long for a stampede of depositors, who were pulling out their banking apps and trying to transfer money out.

In the wake of the pandemic, uninsured deposits have increased in many banks. S&P Global Market Intelligence found that large US banks held $7.9 trillion in uninsured deposits at the end of 2022, up nearly 41% from 2019. The level in 2022 becomes lower than in 2021 as people find better places to put money than bank accounts.

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“Silicon Valley Bank ranks second among banks with more than $50 billion in assets, with 93.9% of its total domestic deposits uninsured, while Signature Bank ranks fourth, according to S&P Global Market Intelligence data 2022 until the end of,” Hayes wrote.

Looking at the banking scenario, some other banks have been highlighted with high levels of uninsured deposits. “Only three other banks boast uninsured domestic deposit rates of more than 80%. All three, Bank of New York Mellon, State Street Corp. ,STT, and Northern Trust Corporation are large trust/custodial banks.”

But Hayes isn’t giving warnings per se. Why not?

Uninsured deposits are only half the story

The high level of uninsured deposits is only half of the risk facing Silicon Valley Bank. Another factor was the high level of bank securities being held all the way to maturity compared to total deposits. This reliance on long-term investments made it difficult for the Silicon Valley bank to sell and raise capital fast enough to meet increasing withdrawals from depositors.

“Compared to Silicon Valley Bank and Signature Bank, all three (of Bank of New York Mellon, State Street and Northern Trust) had a much lower ratio of total loans-to-maturity, or HTM, securities to total deposits, Hayes said.

For example, Bank of New York Mellon’s loans and held-to-maturity securities account for only 31.2% of total deposits. And that percentage is only 40.1% and 54.5% at State Street and Northern Trust, respectively. Compare this to the hemorrhage levels of 94.4% and 93.3% at Silicon Valley Bank and Signature Bank, respectively.

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“As a G-SIB and the oldest bank in the US, BNY Mellon has a strong, well-capitalized and low risk balance sheet with $406 billion in total assets by the end of 2022, of which $197 billion is in cash or other high-quality liquid assets with a deposit ratio of 24%,” said a statement from Bank of New York Mellon.

Understanding Risks on Banks

This is not to say that some banks do not have high exposure to near-to-maturity securities. Let’s do two. “Only two banks with more than $50 billion in assets and at least half of their domestic deposits estimated to be uninsured have total loans and maturing securities that exceed deposits at the end of the year 2022.” First Republic Bank had the highest, at 110.6.%, while Western Alliance Bank, a subsidiary of Western Alliance Bancorp., stood at 101.7%,” the report said.

But it’s important to note that First Republic and Western Alliance also have “very low” levels of uninsured household deposits, compared to Silicon Valley Bank and Signature Bank, at 57.7% and 67.7%, respectively.

Also note that the rules have changed to provide safeguards.

“The regulators also said that depositors in Silicon Valley and Signature will have access to their funds. The move has not completely removed the panic from the system as bank stocks plunged on March 13, but share prices Bouncing back in early trade on March 14,” the report said.

Banks with highest uninsured deposit balances

company Sign Uninsured Deposits / Domestic Deposits (Higher is the higher the risk) Debt and maturity-to-maturity securities / total deposits (riskier) YTD % Change
Bank of New York Mellon ,bk, 96.5% 31.2% -0.1%
SVB Financial Group ,SIVB, 93.9% 94.4% -53.9%
state Street ,STT, 91.2% 40.1% -1.8%
Signature ,SBNY, 89.7% 93.3% -39.2%
Northern Trust ,NTRS, 83.1% 54.5% -3.1%
,C, 77.0% 64.6% 4.3%
hsbc holdings ,hsba, 72.5% 47.4% 11.9%
First Republic Bank ,FRC, 67.7% 110.6% -69.1%
East West Bancorp ,EWBC, 65.9% 91.1% -13.9%
comerica ,CMA, 62.5% 72.8% -36.6%
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Source: S&P Global Market Intelligence

Follow Matt Krantz on Twitter @mattkrantz

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