Qianqiao Water Fund executives: regional banks in the United States may face trillions of dollars of run risk

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）

Interpretation of this information:

The message reports the concern expressed by Bob Elliot, a senior executive of Qianqiao Water Fund and CEO of Unlimited, about the future of Silicon Valley banks and its potential impact on regional banks in the United States. Elliot warned that the decisions made by the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) with regards to Silicon Valley banks may cause regional banks to face trillions of dollars of run risk. Elliot disclosed that almost one third of the deposits in the United States are in small banks, of which 50% are uninsured, and credit cooperatives have an even higher proportion of uninsured deposits. Small banks in the United States hold $6.8 trillion in assets and $680 billion in equity, according to data from the Federal Reserve as of February 2023. Elliot argued that if Silicon Valley banks were to collapse, the risk of thousands of small banks facing a run would significantly increase.

In essence, the message highlights Elliot’s concerns about the fragility of the regional banking system in the United States and its potential vulnerability to adverse decisions made about Silicon Valley banks by regulatory bodies. Elliot’s disclosure of data on the potential extent of the uninsured deposits, particularly in credit cooperatives, sheds light on the significant risk faced by small banks. The fact that small banks hold an enormous amount of assets and equity indicates that their collapse could have dire consequences for the broader financial system. Elliot’s argument that trillions of dollars could be at risk if small banks face a run is a stark warning of the potential fallout of the decisions made by regulatory bodies on Silicon Valley banks.

Overall, the message highlights the fragility of the regional banking system in the United States, the potential impact of adverse decisions made on Silicon Valley banks, and the dire implications of small banks facing a run.