Bank of America (BofA) received more than $15 billion in deposits after Silicon Valley Bank (SVB) failed on Match 10, Bloomberg reported. SVB's sudden closure resulted in its customers moving their deposits to other banks, including BofA. Other banks like JPMorgan Chase & Co, Citigroup Inc. and Wells Fargo & Co. also raked in billions in new deposits, though the figures are yet to be public.

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In an interaction with CNBC-TV18, Mark Matthews, Bank Julius Baer & Co, said he doubted this is the last skeleton to pop out of the closet. "What is going to happen is deposits will flow into big banks and if you combine that with the fact that there has been an implicit guarantee for all deposits, including those above $250,000 for the entire industry, that is what really bailing out SVB and Signature Bank and even if there are more skeletons and they could cause more turmoil. I think longer term, the big banks are fine, and I would say that what has happened is probably going to be a net benefit to them long term,” he said.

Wall Street banks saw a surge in deposits during the COVID-19 pandemic as businesses stashed away cash from stimulus measures. However, the deposits began to dry as the pandemic receded, Federal government assistance programmes ran off and interest rates rose.

At the end of 2022, deposits at Bank of America were down $8 billion compared to the end of the third quarter.

In general, banks can fail for various reasons, including mismanagement, fraud, economic downturns, or other unforeseen circumstances.

To mitigate the risks of bank failures, governments around the world have established deposit insurance schemes that protect depositors for up to a certain amount. In the United States, the Federal Deposit Insurance Corporation (FDIC) insures deposits of up to $250,000 for each depositor in an insured bank.

Reuters on Wednesday reported that the US Federal Reserve is considering tougher rules and oversight for midsize banks similar in size to SVB. Moreover, US prosecutors have started investigating the sudden collapse of the bank.

Last Friday, the California Department of Financial Protection and Innovation (CDFPI) ordered the closure of the Silicon Valley Bank and hand over operations to the Federal Deposit Insurance Corporation (FDIC).

-With inputs from Bloomberg

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First Published:Mar 15, 2023 10:00 AM IST