Bank executives say recent failures had limited deposit impact

The failures of Silicon Valley Bank and Signature Bank had limited impacts on deposits at other banks, according to an IntraFi survey of CEOs, presidents, CFOs and chief operating officers from 567 banks. 

Seventy-seven percent of executives did not see significant shifts in deposits following the March 10 failure of Silicon Valley Bank. Only 14 percent of respondents to the survey, conducted from April 4-14, said deposits had fallen by at least 2 percent. However, 68 percent said customers exhibited increased anxiety about the safety of their deposits following the failure. 

Banks executives said their share of uninsured deposits were far lower than SVB’s estimated 94 percent. According to the report, 52 percent of banks of $1 billion or less said 20 percent or less of their deposits were uninsured. Thirty-six percent of deposits were uninsured both at banks with between $1 billion and $10 billion and regional/large banks.

Eighty-two percent said their bank had not taken advantage of the Federal Reserve’s Bank Term Funding program created following the failures to provide emergency liquidity to depository institutions. 

In the wake of the failures, 62 percent of banks planned to educate uninsured depositors on how to access greater FDIC coverage. Twenty-four percent planned to delay or slow plans to expand their balance sheets, with 18 percent adjusting their credit parameters or raising lending standards. 

An even 43-43 percent split said economic conditions had stayed the same or moderately worsened over the last 12 months. Nearly half expect economic conditions to moderately worsen over the next 12 months.   

Banks reported unchanging access to capital and significant funding increases as the Federal Reserve continued to raise interest rates to quell inflation. Roughly three-quarters of banks said their access to capital was the same as 12 months ago. Only 16 percent said it had moderately worsened. Sixty-one percent of banks said their funding costs had significantly increased from 12 months ago, and another 35 percent listed a moderate increase. 

Seventy-one percent expect to have the same access to capital twelve months from now. Forty-three percent of banks said there was a moderate decrease in loan demand from 12 months ago. Forty-one percent expect demand to fall moderately over the next 12 months.

The majority of banks expect funding costs to further rise in the next 12 months. Forty-nine percent of banks said deposit competition had significantly increased compared to 12 months ago, compared to 38 percent who reported a moderate increase. Nearly half expect deposit competition to moderately increase 12 months from now.