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Federal Reserve and FDIC Decisions on Silicon Valley Banks May Pose Risks for Small Banks in the US

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Federal Reserve and FDIC Decisions on Silicon Valley Banks May Pose Risks for Small 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, recently warned about the potential risk facing small banks in the United States due to the decisions of the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) regarding Silicon Valley banks. According to Elliot, if the Silicon Valley banks collapse, it may cause a ripple effect for regional and small banks, leading to trillions of dollars in run risk.

Elliot highlighted that nearly one third of the deposits in the United States are held by small banks, of which 50% are uninsured. The proportion of uninsured deposits in credit cooperatives is even higher. These findings are alarming, especially when considering the report by the Federal Reserve that small banks in the United States have $6.8 trillion in assets and $680 billion in equity as of February 2023. This further emphasizes the potential risks of a collapse of Silicon Valley banks.

The Federal Reserve and the FDIC are responsible for making decisions on the future of Silicon Valley banks. However, these decisions have repercussions that may affect regional and small banks in the United States. In the case of a Silicon Valley bank failure, there would be a high risk of a bank run, endangering individuals’ and businesses’ deposits in small banks across the US.

It’s important to note that these warnings come at a time when Silicon Valley banks are under scrutiny for their potential risks to the US financial system. These digital banks, which have grown rapidly in recent years, are generally considered to be less regulated and supervised than traditional banks. Therefore, any decisions regarding their future must be made with caution and consideration for the wider financial system.

In summary, Bob Elliot’s warning about the Federal Reserve and FDIC’s decision regarding Silicon Valley banks is certainly warranted. If these banks fail, the potential risk of a massive bank run could spread to small banks, leading to trillions of dollars in run risk. This highlights the need for careful consideration of the future of these banks and a proactive approach to risk management in the US financial system.

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