The Largest U.S. Bank Failures in Modern History

The Briefing

• The collapse of Silicon Valley Bank impacted $175 billion in deposits and $209 billion in assets
• First Republic Bank was seized two months later, in the second-largest bank failure by assets in U.S. history

The Largest Bank Failures in Modern History

Silicon Valley Bank cratered at warp speed—and within weeks, two other institutions folded in the March banking panic.

Just two months later, First Republic became the next casualty. After $100 billion in deposits were drained from the bank in days, the San Francisco-based bank began facing mounting pressures. On Monday, JPMorgan assumed ownership of the failed institution in the second-biggest bank collapse in U.S. history, by assets.

With data from the Federal Deposit Insurance Corporation (FDIC), the above graphic charts over 500 bank failures since 2001.

Top 20 Bank Failures Since 2001

The last time a major banking collapse took place, a flood of bank shutdowns followed.

After banks reported billions in subprime-mortgage losses in late 2007, sentiment began to shift. As losses snowballed in 2008, it triggered a run on shadow banks—institutions that aren’t regulated like banks but perform similar actions.

Back then, banks and shadow banks were holding foreclosed mortgages as collateral. At the time, it was also difficult to determine the value of these assets. A credit crisis spurred a wave of bank collapses.

Here are the top 20 bank failures over the last two decades:

The banks collapsing in more recent days have been holding U.S. Treasuries as collateral. These have declined in value as interest rates have spiked. Their customer bases are also concentrated, which decreases diversification. Just as Silicon Valley Bank served a niche clientele of venture-backed tech startups, Signature Bank worked with high-risk crypto firms.

As these banks poured deposits in long-term bonds when interest rates were historically low, it was a reflection of faulty risk management and the assumption that interest rates would remain at these levels.

What Happens Now?

U.S. banking regulators have shown that they’re serious about preventing any future fallout.

Together, the Federal Reserve, U.S. Treasury, and the FDIC took emergency measures to enable all Silicon Valley Bank and Signature Bank depositors access to their funds days after their collapse. This was after an auction that resulted in no buyer.

For First Republic, all of the 84 branches will now be under ownership of JPMorgan, with the FDIC stating that clients will have access to both insured and uninsured deposits.

In each of the three bank failures so far in 2023, regulators have taken swift action to repay depositors and stem systemic risk. This has led many market participants to believe that banking troubles are contained.

As the effects of the fastest rate hikes in decades continue to be felt, whether or not this proves to be the case is anyone’s guess.

Where does this data come from?

Source: Federal Deposit Insurance Corporation, May 2023.