What do you see? The Empire State Building or the Gorilla?
David Sidon, CPA
SOX / FDICIA / COSO Specialist; Managing Partner at Navis Partners LLC d/b/a The Navis Group; Banque Simulation Architect
After all 4,000 + community banks in the country including every one of my clients put out social media and other blasts that they are clearly not like SVB and are above approach, uber safe and sound, lots of capital, lots of good people, nothing to see here, and so on and so on, it seems to me like we’re missing the point and missing an important moment for introspection.?
SVB’s Call Report numbers at 12/31/22 wouldn’t necessarily have given anyone any pause. Almost every bank has unrealized losses in their portfolio, probably to the tune of 25% of capital at this point in the interest rate cycle, but it seems everyone is overly confident that it will never matter. We can always borrow enough. We can always acquire sufficient brokered deposits. We’ll never need to touch the investment portfolio. Are we really really really sure?
What happened? A social media viral moment sparking a run on the bank. They are, of course, a victim of their own actions, but we’re living in a brave new world of instant information. When the Bailey Building & Loan debacle reached a head, George Bailey was able to get out front of the issue and talk the good folks of Bedford Falls off the ledge. Forty-eight hours of Twitter, Facebook, Snapchat, etc. is all it took to rile up SVB’s entre deposit base.
Are community banks impervious to the “runs”? Think about it. A world war triggered by the Ukrainian crisis, a civil war triggered by anyone of the millions who would like to see one, a stock market implosion, or how about this one, your core system bites the dust overnight. I'm a customer; I want my cash. Now!
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Likely? No. Are you ready to lose half of your deposits? Likely not.
This is not a lesson in safety and soundness, this is a lesson in disaster planning.
Time to dust off those liquidity contingency docs collecting dust up on that shelf over there. This is not “Where’s Waldo” folks, it’s “Oh look! A gorilla!”
Principal, Pastorello & Associates, LLC
1 年Thank you Dave for reminding us why a strong, continuous focus on Liquidity Risk is just as important as managing credit, leverage and interest rate risk.
Partner, WDP Financial and Retired Bank President
1 年Well said Dave. Very well said.