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Comment by barumrho | Hacker News Reader

Withdrawal of $42B in one day. Wow. It does seem like SVB would be uniquely vulnerable to this type of run. (Relatively small # of customers holding large sums of deposit.) Is that incorrect?

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A big issue is that the customer base is highly correlated/undiversified, in the sense that they're all funded by a small set of VC's telling them to withdraw their money. SVB was uniquely exposed to the whims of a small set of individuals in this manner.

Also that all these customers knew their funds weren't insured.

That is true for every bank. Know that in such a scenario NO bank can virtually back $45B in withdrawals.

What's different is how many large accounts SVB had. Most banks have a higher share of funds in smaller accounts. For people with less than $250k at the bank, there's less incentive to withdraw all your funds.

JP Morgan retained a very healthy position throughout the Financial Crisis of 2008-09 largely because they had a large, diffuse base of retail accounts, likely well below insurance limits. I suppose people were happy to keep their cash in.

Since then all major investment banks are salivating over the idea of setting up retail arms for this very reason. Goldman Sachs tried launching "Marcus" for example.

All for the very reason you describe.

Apparently, Only 2.7% of SVB deposits are less than $250,000.

Meaning, 97.3% aren't FDIC insured.

Source: https://twitter.com/GRDecter/status/1634208652595699713

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