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From the Saving Glut to Financial Instability: Evidence from the Silicon Valley Bank Failure

Author

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  • Vuillemey, Guillaume

    (HEC Paris)

Abstract

I show that the saving glut spurs banking instability. In the US, banks locally exposed to its root causes -- higher savings by intangible-intensive firms and the rise in household wealth inequality -- massively increased deposits since 2000, leading to an unprecedented deposit-to-GDP ratio and to a surge in uninsured deposits. To causally identify an impact of this ``deposit glut'' on financial instability, I use the unexpected failure of Silicon Valley Bank in March 2023 as a quasi-natural experiment: other US banks with high local exposure to either intangible-intensive firms or wealth inequality experienced significantly larger drops in market valuation.

Suggested Citation

  • Vuillemey, Guillaume, 2023. "From the Saving Glut to Financial Instability: Evidence from the Silicon Valley Bank Failure," HEC Research Papers Series 1475, HEC Paris.
    • Handle: RePEc:ebg:heccah:1475
    DOI: 10.2139/ssrn.4413287
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    Cited by:

    1. Beck, Thorsten & Ioannidou, Vasso & Perotti, Enrico & Sánchez Serrano, Antonio & Suarez, Javier & Vives, Xavier, 2024. "Addressing banks’ vulnerability to deposit runs: revisiting the facts, arguments and policy options," Report of the Advisory Scientific Committee 15, European Systemic Risk Board.

    More about this item

    Keywords

    Saving glut; Silicon Valley Bank; Deposits; Financial stability; Wealth inequality; Intangibles;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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