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Given it is fairly common for FDIC. What is the history in such cases? Do depositors always get all money back or they have to take some haircut?

Denvercoder9 4y ago
They publish all historic payouts for closed banks on their website: https://closedbanks.fdic.gov/dividends/ https://closedbanks.fdic.gov/dividends/ From a quick look at a random sample, it seems most end up with about ~70% paid out, but there is quite some variance.
- paxys 4y ago
  Worth noting though that this list covers everything from cases of incompetence and mismanagement to outright fraud. It's relatively easy to recover money if it is tied up in T-bills. Not so if the bank owner decided to go buy a yacht with customer funds.
- kasey_junk 4y ago
  That’s the list for all creditors, not depositors. Almost all deposits get transferred to another financial institution. It will be listed on the failed bank report.
sql-spy 4y ago
In most cases depositors recover 90% or higher. Insured deposits are paid on first day the bank opens. More than 50% of uninsured deposits are paid within a week. Another 20% or so gets paid within a year or sooner in quarterly installments. Remaining amount gets paid in yearly installments and in all cases was paid within 3 years. Haircut is guaranteed in this political climate since there is no appetite for a bailout. At least not for SVB. The later ones could be bailed out but SVB is a goner.
- Denvercoder9 4y ago
  > More than 50% of uninsured deposits are paid within a week. Another 20% or so gets paid within a year or sooner in quarterly installments. Remaining amount gets paid in yearly installments and in all cases was paid within 3 years. The data does not support these statements. E.g. for a random bank I selected on the FDIC site [1], "American National Bank", uninsured depositors got paid 77.8% in three installments: the first 57% two weeks after bank closure, 7.4% after three years and the last 13.3% after five-and-a-half years. [1] https://closedbanks.fdic.gov/dividends/ https://closedbanks.fdic.gov/dividends/
  - kasey_junk 4y ago
    https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/amer-natl-oh.html https://www.fdic.gov/resources/resolutions/bank-failures/fai... American national had its deposits transferred. The dividend payments were to other creditors.
- searealist 4y ago
  > Haircut is guaranteed in this political climate since there is no appetite for a bailout. At least not for SVB. The later ones could be bailed out but SVB is a goner. SVB stock and bond holders will lose everything but it is far from guaranteed that depositors will take a haircut.
- dkjaudyeqooe 4y ago
  > Haircut is guaranteed Not if someone buys it. Unless a haircut is part of the bid, which seems unlikely. No point having 97% of your new customers pissed off at you.
- dh2022 4y ago
  But where will the money that pays un-insured deposits come from? SVB's assets are worth less than its liabilities at this point....
  - barnabee 4y ago
    If SVB is acquired, the acquirer also takes on the liability to depositors (most likely all of it, but a haircut could be negotiated) so everyone should get everything back (unless a haircut is negotiated) and handling the shortfall is a cost to the acquirer. Perhaps they believe the future value of the business justifies that, perhaps they don’t and the government pushes them to do it anyway. If it’s not acquired depositors will take a haircut (get paid less) in the unwinding process so that the amount paid out doesn’t exceed the assets available.
  - loeg 4y ago
    A buyer might be willing to pay a premium (above the assets alone) for the business, which was worth $15.5B to shareholders as recently as Wednesday. Levine's column on this failure is great, you should check it out: https://archive.is/cN3CD https://archive.is/cN3CD .
lamontcg 4y ago
There's really no good history for this kind of a case. Washington Mutual was a bigger failure, but there was another lender who had already attempted to take it over, and had done due diligence, and Washington Mutual had a large amount of unsecured debt which allowed those lenders to take the hit and left depositors completely unscathed. IndyMac was a smaller bank but it was over $10B in assets and the FDIC had to setup a Bridge Bank because the attempt to auction it off failed, so the FDIC had to impose a loss of 14% of total deposits on the depositors. > Since 2007, the FDIC has served as receiver for over 525 banks. Only 9 of these failed banks had assets over $10 billion. Thus, the overwhelming majority, over 98 percent, had assets under $10 billion. The FDIC routinely liquidates banks under $10B. What we have here is not routine, and is Washington Mutual-sized. The smoothness of Washington Mutual being taken over though was probably not something you can expect to rely on. https://www.fdic.gov/news/speeches/2019/spoct1619.html https://www.fdic.gov/news/speeches/2019/spoct1619.html

Denvercoder9 4y ago

They publish all historic payouts for closed banks on their website: https://closedbanks.fdic.gov/dividends/ https://closedbanks.fdic.gov/dividends/ From a quick look at a random sample, it seems most end up with about ~70% paid out, but there is quite some variance.

paxys 4y ago
Worth noting though that this list covers everything from cases of incompetence and mismanagement to outright fraud. It's relatively easy to recover money if it is tied up in T-bills. Not so if the bank owner decided to go buy a yacht with customer funds.
kasey_junk 4y ago
That’s the list for all creditors, not depositors. Almost all deposits get transferred to another financial institution. It will be listed on the failed bank report.

sql-spy 4y ago

In most cases depositors recover 90% or higher. Insured deposits are paid on first day the bank opens. More than 50% of uninsured deposits are paid within a week. Another 20% or so gets paid within a year or sooner in quarterly installments. Remaining amount gets paid in yearly installments and in all cases was paid within 3 years. Haircut is guaranteed in this political climate since there is no appetite for a bailout. At least not for SVB. The later ones could be bailed out but SVB is a goner.

Denvercoder9 4y ago
> More than 50% of uninsured deposits are paid within a week. Another 20% or so gets paid within a year or sooner in quarterly installments. Remaining amount gets paid in yearly installments and in all cases was paid within 3 years. The data does not support these statements. E.g. for a random bank I selected on the FDIC site [1], "American National Bank", uninsured depositors got paid 77.8% in three installments: the first 57% two weeks after bank closure, 7.4% after three years and the last 13.3% after five-and-a-half years. [1] https://closedbanks.fdic.gov/dividends/ https://closedbanks.fdic.gov/dividends/
- kasey_junk 4y ago
  https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/amer-natl-oh.html https://www.fdic.gov/resources/resolutions/bank-failures/fai... American national had its deposits transferred. The dividend payments were to other creditors.
searealist 4y ago
> Haircut is guaranteed in this political climate since there is no appetite for a bailout. At least not for SVB. The later ones could be bailed out but SVB is a goner. SVB stock and bond holders will lose everything but it is far from guaranteed that depositors will take a haircut.
dkjaudyeqooe 4y ago
> Haircut is guaranteed Not if someone buys it. Unless a haircut is part of the bid, which seems unlikely. No point having 97% of your new customers pissed off at you.
dh2022 4y ago
But where will the money that pays un-insured deposits come from? SVB's assets are worth less than its liabilities at this point....
- barnabee 4y ago
  If SVB is acquired, the acquirer also takes on the liability to depositors (most likely all of it, but a haircut could be negotiated) so everyone should get everything back (unless a haircut is negotiated) and handling the shortfall is a cost to the acquirer. Perhaps they believe the future value of the business justifies that, perhaps they don’t and the government pushes them to do it anyway. If it’s not acquired depositors will take a haircut (get paid less) in the unwinding process so that the amount paid out doesn’t exceed the assets available.
- loeg 4y ago
  A buyer might be willing to pay a premium (above the assets alone) for the business, which was worth $15.5B to shareholders as recently as Wednesday. Levine's column on this failure is great, you should check it out: https://archive.is/cN3CD https://archive.is/cN3CD .

lamontcg 4y ago

There's really no good history for this kind of a case. Washington Mutual was a bigger failure, but there was another lender who had already attempted to take it over, and had done due diligence, and Washington Mutual had a large amount of unsecured debt which allowed those lenders to take the hit and left depositors completely unscathed. IndyMac was a smaller bank but it was over $10B in assets and the FDIC had to setup a Bridge Bank because the attempt to auction it off failed, so the FDIC had to impose a loss of 14% of total deposits on the depositors. > Since 2007, the FDIC has served as receiver for over 525 banks. Only 9 of these failed banks had assets over $10 billion. Thus, the overwhelming majority, over 98 percent, had assets under $10 billion. The FDIC routinely liquidates banks under $10B. What we have here is not routine, and is Washington Mutual-sized. The smoothness of Washington Mutual being taken over though was probably not something you can expect to rely on. https://www.fdic.gov/news/speeches/2019/spoct1619.html https://www.fdic.gov/news/speeches/2019/spoct1619.html