But their manageable size makes the regional banks – as the SVB case has shown – also prone to panic. Especially if you have a lot of uninsured deposits. And that’s not uncommon. Example Live Oak Bankshares from North Carolina, an institution that is primarily aimed at small and medium-sized businesses: In the fourth quarter of 2022, almost 98 percent of their deposits exceeded the $250,000 threshold, which is protected by the state. At Cathay General Bankcorp from Los Angeles, the value was 95 percent, at First Hawaiian Inc 94 percent. For comparison: At the failed crisis institute First Republic Bank it was less than 86 percent.
Also read: Another US bank – that reminds of the time before the outbreak of the last financial crisis
Taken individually, none of the regional banks are systemically important. But all in all, the crisis in the sector poses a risk. The FDIC’s insurance fund is already underfunded — especially since the Biden administration used it in March to guarantee all deposits from the failed SVB and Signature Bank.