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The FDIC can decide what deposits live and which ones die. For now, the deposit insurer has told SVB’s Cayman depositors they can file unsecured claims in the bankruptcy by July 10. 

https://mises.org/power-market/some-bank-depositors-get-smoke-others-mirrors

Doug French

Over dinner the other night a business man mentioned that he had large amounts on deposit in the nation’s banks and said words to the effect that there is no way the government will let those deposits which are various company operating accounts go “pfft.”

On that subject, while Silicon Valley Bank’s US deposits have been covered, SVB’s deposits in the Cayman Islands have gone “pfft ” or to be more clear those depositors have become unsecured creditors in the SVB bankruptcy. The bank’s foreign deposits totaled $13.9 billion at the end of last year. “The branch in the offshore tax haven was set up to primarily support the bank’s activities in Asia, according to SVB. Its depositors, which include multiple Chinese investment firms, haven’t been able to access their funds—and have been in limbo since SVB’s collapse,” reports the Wall Street Journal’s Frances Yoon.

Depositors are more than surprised, after all the Federal Reserve Board made a statement after the SVB failure, “After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that ”fully protects all depositors.” (emphasis added)

A spokesperson for Phoenix Property Investors, a Hong Kong-based private-equity firm that had funds in SVB’s Cayman Islands branch told the WSJ “We feel misled and are now doing what we can to recover our deposits.”

Now it’s worse than being misled. Those same deposit customers who have loans outstanding are being told to pay up by loan purchaser First Citizen Bank. Ms. Yoon and Serena Ng write in the WSJ, “Some of those same venture-capital and private-equity funds had previously drawn on credit lines that were linked to their SVB deposit accounts. Their outstanding loans were among the assets that were sold to First Citizens, customers of the bank told the Journal.” 

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