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Analysts say SVB and Signature were vulnerable because their client base was relatively concentrated among businesses in particular sectors, such as tech, commercial property and crypto – leaving them exposed if those sectors came under strain, or suddenly stopped wanting to do business with them.
At Signature, deposits fell 20% in the first nine months of 2022, according to CFRA Research.
More typically, banks can count on a large number of clients, who won’t all want to move money at the same time – or hold such large sums that it will make a difference.
That’s one reason many analysts say they’re not worried this will spread much farther.
But the percentage of deposits that are insured has fallen to about 50% in recent years, according to analysts at Wells Fargo Bank. (At Signature, just 10% of deposits were insured, according to CFRA.)
On Monday, Bloomberg reported that federal home loan banks – which serve as a funding backstop for regional banks – were looking to raise money, and Reuters news agency said the federal home loan banks were seeing higher-than-usual demand for funds.
Those are signs of the way that the situation has caused wider worries about the risk of cash crunch.
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