US banks have well over $1 trillion of uninsured deposits. Signature Bank was among the most exposed.

• The US government shut down Signature Bank on Sunday.
• On Friday, regulators closed Silicon Valley Bank, sparking panic among startups and VCs. 
• Both banks had a huge amount of customer deposits that were not insured by the FDIC. There are others.

A second bank was shut down by the US government on Sunday. This time it was Signature Bank. 

What does this financial institution have in common with Silicon Valley Bank? They both had huge amounts of customer deposits that were not insured by the FDIC. 

The FDIC insures US bank deposits up to $250,000 per account to prevent bank runs and failures. The demise of SVB, and now the collapse of Signature Bank, have stretched this system to a breaking point. 

On Sunday, the US Treasury, Federal Reserve, and FDIC said in a joint statement that all depositors of SVB will be made whole on Monday. The authorities are completely ignoring the $250,000 insurance limit. SVB had $173 billion in total deposits and roughly 88% of that was not covered.

That’s more than $150 billion in extra deposits that the FDIC has suddenly decided to insure. 

The authorities are giving the same special exemption to Signature Bank, so all depositors will be made whole there too. Signature had $89 billion in total deposits, and 90% of those were not insured by the FDIC. That’s another $79 billion that this agency is taking on its shoulders. 

“By insuring all deposits at SVB and Signature, regulators judged the risk of cascading effects to other regional banks and the broader economy to be more significant than the moral hazard of increasing FDIC limits,” said Rich Falk-Wallace, CEO of data analytics firm Arcana and a former portfolio manager at hedge fund Citadel.

In the case of SVB and Signature, the high percentage of uninsured deposits is partly a function of having a relatively small number of clients with large balances. At SVB, for example, Roku revealed it had almost $500 million in deposits at the bank, extending far beyond the $250,000 guarantee. Banks with a much greater number of retail customers meanwhile would typically have a much lower average balance and a much higher percentage of insured deposits.

Insider analyzed the regulatory filings of 15 major US banks to see how many uninsured deposits were out there at the end of 2022. The answer is well over $1 trillion.

One thing to note on this list is the presence of First Republic, which saw its share price take a sharp dive last week as fears spread about contagion. 

In a regulatory filing Friday, First Republic said the average size of deposits held by its customers was $200,000, less than the $250,000 limit insured by the FDIC, while its average business account held $500,000. 

“First Republic’s liquidity position remains very strong,” the bank said. “Sources beyond a well-diversified deposit base include over $60 billion of available, unused borrowing capacity at the Federal Home Loan Bank and the Federal Reserve Bank.”

Here’s a ranking, based on the percentage of total deposits that are not insured by the FDIC:

Note: Data as of the end of 2022.