Potential Impact of Federal Reserve’s Decisions on Silicon Valley Banks on Regional Banks in the US

03/12/2023 04:26 • Daily Digest • 73 views

Potential Impact of Federal Reserves Decisions on Silicon Valley Banks on Regional Banks in the US

It is reported that Bob Elliot, a senior executive of Qianqiao Water Fund and CEO of Unlimited, an investment company, said in a social media message that the decisions of the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) on the future of Silicon Valley banks may affect regional banks in the United States and cause them to face trillions of dollars of run risk. Bob Elliot disclosed data that nearly one third of the deposits in the United States are deposited in small banks, of which 50% are uninsured, and the proportion of uninsured deposits in credit cooperatives is even higher. According to the data of the Federal Reserve, as of February 2023, small banks in the United States have $6.8 trillion in assets and $680 billion in equity. The collapse of Silicon Valley banks will bring “the risk of running thousands of small banks”. （Cointelegraph）

Qianqiao Water Fund executives: regional banks in the United States may face trillions of dollars of run risk

Analysis based on this information:

Bob Elliot, a senior executive of Qianqiao Water Fund and CEO of Unlimited, has recently stated on social media that the decisions made by the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) on the future of Silicon Valley banks may have a significant impact on regional banks in the United States. He believes that these decisions could potentially cause regional banks to face trillions of dollars of run risk.

According to Elliot, nearly one third of deposits in the United States are deposited in small banks, of which 50% are uninsured. Additionally, the proportion of uninsured deposits in credit cooperatives is even higher. Elliot referred to data from the Federal Reserve, which as of February 2023 shows that small banks in the United States have $6.8 trillion in assets and $680 billion in equity.

The collapse of Silicon Valley banks will have major consequences. It will bring “the risk of running thousands of small banks”. This could create a scenario where people start withdrawing their deposits from small banks, fearing a domino effect that could eventually lead to the collapse of these banks.

The FDIC provides insurance to depositors in case of bank failures, up to a certain limit. However, in the scenario of a large-scale bank failure, this insurance fund may not be sufficient to cover all the losses. Elliot’s concern is that the decisions made by the Federal Reserve and FDIC regarding Silicon Valley banks could lead to such a scenario.

The concerns raised by Bob Elliot highlight the potential consequences of decisions made by regulators on the banking industry. The implications of these decisions extend far beyond the Silicon Valley banks and have the potential to affect the entire regional banking sector in the US. It highlights the need for regulators to make well-informed decisions that consider the potential consequences and risks faced by the broader banking industry.

In summary, Bob Elliot’s statement on social media raises concerns about the potential risk of bank runs faced by regional banks in the United States. With a significant proportion of deposits in small banks being uninsured, the collapse of Silicon Valley banks could have a domino effect and lead to trillions of dollars in run risk for small banks in the US.

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