Remarks by FDIC Chairman Martin J. Gruenberg on the Lessons Learned from the U.S. Regional Bank Failures of 2023 at the European Banking Union Conference
Thank you for the invitation to speak today at this conference celebrating the 10th anniversary of the launching of the Banking Union. I am deeply grateful to the Florence School of Banking and Finance, and in particular to Ignazio Angeloni, for the privilege of participating in this program.
The establishment of the European Banking Union was a landmark event not just for Europe but for the global financial system. In particular, the establishment of the Single Supervisory Mechanism within the European Central Bank, and the Single Resolution Board, in my view, significantly enhanced financial stability globally. I only hope Europe is able to implement the third leg of the Banking Union and advance the European Deposit Insurance Scheme. Perhaps that would be the subject of another speech.
Today however, I would like to focus on the U.S. experience with the failures of three large regional banks last year and the lessons we have drawn from that experience for both supervision and resolution.
As many of you probably know, on March 10, 2023, SVB, with $209 billion in assets at year-end 2022, was closed by the state banking authority, who appointed the FDIC as receiver. Stress at the firm had become apparent a few days earlier, on Wednesday, March 8, when Silicon Valley Bank (SVB) announced a $1.8 billion loss on sale of securities, experiencing the consequences of unrealized losses on those securities, and a concurrent plan to raise $2 billion in capital to shore up its balance sheet. Then, on Thursday, March 9, shares of SVB fell 60 percent, and it experienced a run by uninsured depositors.
By that evening, $42 billion in deposits had left the bank with an additional $100 billion staged to be withdrawn the next day. To put this in perspective, nearly 30 percent of deposits left the bank in a matter of hours, and another 50 percent were set to leave. Of great relevance, over 90 percent of SVB’s deposits were uninsured.
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