Depositors are ‘run’ning scared

Seeking more stable banks

The failure of Silicon Valley Bank could spark a run on other regional and mid-sized banks across the country this week, as wealthy individuals and businesses rush to pull their money out of accounts too big for FDIC coverage and flee to larger, more stable institutions amid fears the risk could be systemic, sources told The Post.

“Small regional banks are done,” one banking source said. “Everyone is going to want to put their money in JPMorgan or Bank of America.”

Sources told The Post the big Wall Street banks such as Morgan Stanley are also seeing “massive inflows” of cash as wealthy depositors move to protect their cash amid fears of more bank implosions.

If a buyer steps in this weekend to scoop up SVB, which catered to startups in tech and other industries, it could avert a disaster. But potential buyers are skittish about taking over the troubled bank without backing from the federal government.

Sources said it’s going to be difficult to get another bank or privateequity firm to buy SVB in its entirety unless the feds step in, because there’s simply too much uncertainty and risk associated with a deal, people with knowledge of potential buyers’ thinking told The Post.

“My instinct is either someone buys the whole thing with concessions from government or it goes to receivership,” one banker close to the negotiations told The Post.

“No one wants to do the deal without a government backstop,” a private-equity insider echoed. “The government needs to prepackage a deal, like they did with Lehman.”

Another banker pointed out the Lehman Brothers collapse is still tied up nearly 15 years after its failure.

“No one wants to take on that kind of headache,” the banker said.

One top investment bank sent a note to clients advising what could happen if no buyer steps in, according to a transcription reviewed by The Post.

The note outlined how the FDIC is spending the weekend assessing the value of SVB’s assets. On Monday it will pay out up to $250,000 in insurance coverage for all accounts at that level or below.

Sources also said the CEOs of some major financial firms are imploring the feds to cover deposits greater than the quarter-milliondollar limit, predicting that limiting the SVB recovery will lead to a run at other banks, particularly ones with clients who use deposits for funding needs. The agency will also make a payment, called an advanced dividend, to uninsured depositors as quickly as possible.

“The rest may take anywhere from 60 days to two years to get paid out,” the note read.

GIVE US OUR MONEY! The fall of now-shuttered Silicon Valley Bank might be just the first in a line of dominoes upending other regional and mid-sized banks, financial sources with a gloomy outlook told The Post.