‘Strength and Stability’: Banks and Regulators Seek to Reassure

Banking groups and regulators are seeking to reassure stakeholders of the industry’s strength and stability in the wake of two of the biggest failures in US history.

Trade bodies and federal and state organizations have all issued statements in the past few days as they aim to limit the wider impact of the collapses of Silicon Valley Bank and Signature Bank, as well as the voluntary liquidation of Silvergate Bank.

President Joe Biden said on Monday that “Americans can have confidence that the banking system is safe” due to the actions taken by federal and state regulators over the previous few days.

State officials in New York and California placed Signature Bank and Silicon Valley Bank in receivership, appointing the Federal Deposit Insurance Corporation (FDIC) to take over operations of both banks.

“Because of the actions that our regulators have already taken, every American should feel confident that their deposits will be there if and when they need them,” the president said.

A spokesperson for the American Bankers Association told Banking Exchange: “We share President Biden’s confidence in the nation’s banking system. Every American should know that their accounts are safe and their deposits are protected. Our industry will work with the administration, regulators and Congress to further bolster that trust.”

A joint statement from the FDIC, the Federal Reserve and the Treasury Department on Sunday also sought to reassure the public after regulators had worked over the weekend to address the liquidity issues at both banks.

“The US banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry,” the joint statement said. “Those reforms combined with today's actions demonstrate our commitment to take the necessary steps to ensure that depositors' savings remain safe.”

The Fed has also set up an emergency funding facility — the Bank Term Funding Program — for depository institutions to provide additional liquidity if banks are struggling to meet customer withdrawals.

Trade bodies highlight strength

The Independent Community Bankers of America (ICBA) trade body praised the Fed’s quick move to begin a review of how Silicon Valley Bank, which is to be led by vice chair for supervision Michael Barr.

ICBA president and CEO Rebeca Romero Rainey called for other agencies to follow the Fed’s example, and also pledged to “vehemently oppose community banks bearing any financial responsibility for potential losses to the deposit insurance fund”.

“In stark contrast to the nation’s largest banks, community banks operate under an entirely different business model — one that’s based locally and is relationship focused,” Rainey said. “As small businesses themselves, local community banks take pride in serving the unique needs of their customers and communities. In short, they are in it for the long haul to serve the needs of those who count on them for financial stability and prosperity.”

The National Bankers Association (NBA) also spoke out to reassure customers of minority depository institutions (MDIs). The association highlighted that MDIs were “exceptionally well capitalized” with “substantial liquidity” and had experienced strong growth in recent years.

“Minority banks are not exposed to riskier asset classes and have the capital and strong liquidity to best serve consumers and small businesses,” said Nicole Elam, president and CEO of the NBA.

In a statement, National Credit Union Association (NCUA) chairman Todd Harper said: “The credit union system remains well-capitalized and on a solid footing. The NCUA continues to monitor credit union performance through both the examination process and offsite monitoring, and it will continue to do so into the future.”

Many individual banks have also issued statements in the past few days setting out their liquidity position and affirming their ability to serve customers. These included Western Alliance Bank, East West Bank, John Marshall Bank, First Republic Bank, Preferred Bank, Pacific Western Bank, FFB Bank, BCB Bank, and First Foundation Bank.

Meanwhile, Citizens Bank has temporarily extended its business hours in an effort to serve a wave of new customers seeking assistance in the wake of the banking sector turmoil.