During a 2022 Halloween celebration in Seoul, South Korea, an estimated 100K people took to the narrow streets of Itaewon before the event devolved into a crowd crush that killed over 150 revelers. Most assume that crowd crushes are the result of sudden panic. According to psychology and crowd management experts, though, crowd crushes are purely accidental events that become likely when a crowd is packed to a density of six or more people per square meter. If just one person sways, slips, or falls, it creates a domino effect that the rest of the crowd becomes powerless to stop. Between some collapsing on each other and others being pressed against physical barriers, the threat of asphyxiation is what spurs people to panic, push, and run.
In the case of a deposit run at a bank, it’s usually the fear that precedes the reaction of deposit flight. Three years after the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank, the FDIC has released one of the most detailed studies yet on how those deposit runs unfolded in real time. Using depositor-level account activity and wire transfer data, the report examined how customers moved funds once confidence in the institutions began to weaken.
For many community financial institutions (CFIs), the broad lessons from 2023 are already familiar. Liquidity planning, uninsured deposits, and contingency funding all returned to the forefront. What makes this study different is the operational detail behind those events and what it reveals about how depositor behavior has evolved in a digital banking environment.
Deposit Runs Now Move Much Faster
One of the clearest findings from the report was the speed of the outflows. Roughly half of deposits left some of the failed institutions within approximately three business days.
That pace differs significantly from historical banking stress events in a couple of ways:
- Mobile banking capabilities. Deposit runs in the past were dependent on customers getting to a physical branch and standing in line to withdraw deposits and close accounts. With the advent of robust online banking, customers looking to take their funds from an institution can simply open an account elsewhere from their smartphones in just a few minutes, then set up a transfer from their current institution to the new account without any travelling or waiting.
- Rapid news cycle driven by social media. Where institutions often had more time to react operationally and communicate with customers, in the past, social media and real-time alerts pushed to smartphones help word travel in seconds. Once customers caught wind that their financial institution was struggling and may close, some of them took to social media to voice their concerns, driving other customers of the same institution to take action and withdraw their funds. In 2023, digital banking platforms, treasury portals, and wire capabilities accelerated the movement of funds considerably.
For CFIs, the takeaway is not necessarily that deposit runs are more common, but that liquidity stress can develop far faster than in previous times of banking turbulence. Access to liquidity, operational readiness, and customer communication timing all become critical when funds can move almost immediately and depositors are motivated to move them.
Large Uninsured Deposits Drove Outflows
The study also found that each institution’s top 0.5% of depositors were drastically more likely to move funds during the stress period than depositors with accounts that were within the $250K FDIC insurance limit. For instance, 74% of Silicon Valley Bank’s top 0.5% depositors had fled the institution by March 17, while only 23% of the bottom 20% of depositors had withdrawn their deposits.
Based on past studies cited in the FDIC’s data, this trend could be driven by a large proportion of the top depositors being financial companies, as those companies are shown to be more sensitive to weak balance sheets than other companies.
That finding reinforces the importance of understanding deposit concentration alongside overall deposit growth. Many CFIs have successfully expanded commercial and treasury relationships in recent years, often bringing in larger operating balances and commercial deposits.
Those relationships can provide meaningful franchise value, but the FDIC study suggests concentration risk deserves continued monitoring, especially when large balances are tied to a smaller group of customers or industries.
The report also noted that customer relationships helped somewhat, but did not fully offset concentration-related behavior. Longer banking relationships modestly reduced run propensity, though the effect was considerably smaller than the impact of large uninsured balances.
Retail Deposits Proved More Stable
While large uninsured balances moved quickly, the study found that fully insured retail deposits generally remained stable and, in some cases, increased during the stress period.
That finding aligns with what many CFIs have historically viewed as a core strength: diversified customer relationships supported by local market presence and long-standing trust.
The study does not suggest retail deposits are immune from pressure, but it does reinforce the stabilizing role insured consumer relationships can play during periods of uncertainty.
Operational Accounts Were Not Immune
One of the more notable findings involved business operating accounts. The FDIC found that many businesses rapidly withdrew operational balances during the stress period, including accounts associated with routine business activity. In just three business days, First Republic Bank lost 60% of its business deposits, while Signature Bank of New York lost 49% of its business deposits.
Historically, some institutions may have viewed certain operational balances as relatively stable because they support payroll, escrow activity, or day-to-day transactions. The study showed those assumptions may not always hold during periods of acute stress.
For CFIs, that may prompt additional discussion around how operational deposits are modeled within liquidity planning and stress testing frameworks.
Payment Operations Became Part of the Stress Event
The mechanics of the outflows were also revealing. Most withdrawals occurred through wire transfers rather than branch activity or physical cash movement. A total 87% of the $89.9B net deposit loss at Silicon Valley Bank happened via wire transfer. First Republic Bank had the lowest proportion of deposits of the three banks leave via wire transfer, at 65% of the $62.4B in net deposits that left.
That operational reality extends the conversation beyond liquidity alone. During periods of stress, institutions may also need to think through wire processing capacity, staffing levels, fraud monitoring, payment operations, and customer communication workflows.
As payment systems continue evolving toward faster and more immediate movement of funds, operational preparedness increasingly becomes part of broader liquidity readiness.
What CFIs Can Learn From the Study
The FDIC study should not be viewed as a prediction of future failures or as evidence that all institutions face the same risks as the banks examined in the report, since the failed institutions’ deposit bases and business models were very different from those of most CFIs.
Still, the report offers one of the clearest real-world looks yet at how depositors responded during a fast-moving banking stress event. For CFIs, the value of the study is less about revisiting the events of 2023 and more about understanding how digital banking, payment infrastructure, and depositor concentration can shape liquidity dynamics moving forward.
