SVB customers tried to collect almost all credits in two days,

Michael S. Barr, Vice Chairman of the Board of Governors of the Federal Reserve, testifies at a Senate Banking, Housing, and Urban Affairs Committee hearing on “Recent Bank Failures and the Federal Regulatory Response” on Capitol Hill in Washington, March 28, 2023.

Evelien Hockstein | Reuters

The run on Silicon Valley Bank deposits this month went much deeper than initially known.

It has been public since the day regulators seized SVB knowledge that panicked customers withdrew $42 billion from the bank on March 9 over fears that uninsured deposits were at risk.

But that pales in comparison to what would have happened the next day, Michael Barr, vice chairman of oversight at the Federal Reserve, testified before the Senate Banking Committee on Tuesday. Regulators Closed SVB on March 10 in the largest bank failure since the 2008 financial crisis.

“That morning, the bank informed us that they expected the outflow to be much higher based on customer requests,” Barr said. “A total of $100 billion would go out the door that day.”

The $142 billion combined withdrawal figure represents a whopping 81% of SVB’s $175 billion in deposits as of year end 2022.

Lawmakers summoned top US banking regulators to Washington to explain why Silicon Valley Bank and Signature Bank collapsed earlier this month. Barr and others pointed to mismanagement by bank executives and noted that banks with assets over $100 billion may need stricter regulations. The former CEOs of the banks were not present.

SVB’s last days

SVB’s last days as an independent bank were a rollercoaster of emotions. After SVB management “shocked” investors and clients with its “belated” attempt to raise capital late Wednesday, March 8, the situation appeared to have calmed down early Thursday, Barr testified.

“But Thursday afternoon later the outflow of deposits started and Thursday evening we learned that more than $42 billion, as you indicated, had left the bank,” he said.

Fed personnel worked around the clock on March 9 to bail out the bank, seeking enough collateral to borrow additional billions of dollars from the Fed’s rebate window to honor withdrawal requests, Barr said.

The morning SVB seized, regulators thought they had resolved the bank’s shortfall, but ran into a wall of $100 billion withdrawals.

“They were unable to actually meet their payment obligations to their depositors during the course of that day and they were shut down,” Barr said.