It’s been exactly one year since Silicon Valley Bank collapsed after investment losses resulted in a bank run. Why smaller banks are still battling a confidence crisis. Video / Carson Bluck
It’s been exactly one year since Silicon Valley Bank (SVB) collapsed, triggering other failures, and smaller United States banks are still trying to overcome a confidence crisis.
“The failures created a crisis of confidence that has dramatically altered the competitive dynamics across the industry,” PNC Bank chief executive William Demchak wrote in the sixth largest US bank’s recent annual report.
“Consumers and businesses have now begun to question the stability and regulatory oversight of small and mid-sized banks — and that, in turn, has tilted the playing field strongly in favour of big banks.”
On March 10 last year, SVB suffered a run on deposits after revealing a capital raise to cover investment losses; customers pulled US$42 billion ($NZ68b) from the bank in a single day.
It was still operating as a division of First Citizens Bank, which acquired it.
SVB released statistics showing it had restored some confidence with US$38b back in deposits - compared with the more than US$200b it had pre-collapse.
Issues are still evident across the sector; one of the largest regional banks, New York Community Bank, which acquired the failed Signature Bank last year, was just subject to a US$1 billion rescue package.
Its share price fell by as much as 42 per cent before the package was announced last week.
Chris Marinac, director of research at Janney Montgomery Scott, echoed the confidence crisis.
“The confidence in the company is also less than folks have perceived, and that’s how we got to this ongoing saga,” he told Markets with Madison.
On this day last year: Silicon Valley Bank customers - mostly business owners in San Francisco - pulled US$42 billion from their accounts in a single day, causing it to collapse. Photo / John Brecher for The Washington Post via Getty Images
NYCB’s balance sheet issues did not exactly mirror SVB’s.
Rather, it was under regulatory pressure.
It was preparing to fall under regulatory stress tests in April, which required it to put more money aside to cover potential losses on unpaid loans, especially as interest rates moved higher.
“They really had to become a big bank. They went from the minor leagues to the major leagues.”
Despite NYCB’s problems, Marinac described the rest of the regional banking sector in the US as healthy.
He believed the biggest US banks, such as JP Morgan Chase and Bank of America, now faced bank run risks, because depositors were not insured for any amounts above US$250,000.
Watch him discuss what’s happened in the year since SVB’s failure in today’s episode of Markets with Madison above.
Get investment insights from executives and experts on Markets with Madison every Monday and Friday here on the NZ Herald, on YouTube and wherever you get your podcasts.
Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is the host of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
