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Banks in Turmoil

Regional banks still face challenges after bank runs

Lily Jamali Jun 16, 2023
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Silicon Valley Bank was one of the regional banks that failed earlier this year. Patrick T. Fallon/AFP via Getty Images
Banks in Turmoil

Regional banks still face challenges after bank runs

Lily Jamali Jun 16, 2023
Heard on:
Silicon Valley Bank was one of the regional banks that failed earlier this year. Patrick T. Fallon/AFP via Getty Images
HTML EMBED:
COPY

It’s been about three months since the beginning of the crisis that brought down a series of regional banks, starting with Silicon Valley Bank, then Signature Bank and others.

Consumer withdrawals have stabilized, said Alexi Savov, a finance professor at New York University’s Stern School of Business.

“Now, it’s a little bit more of a trickle, which is easier for banks to deal with,” Savov said.

But some regional banks that are still standing have struggled. The stock prices of Pacific West, Zions and Fifth Third banks are way down since March.

There’s still a difference between what bank assets are valued at on paper and what they’re actually worth, with one recent study estimating there are at least $2 trillion of those unrealized losses, the kind that brought down SVB.

In this climate, regional banks are operating under more scrutiny from the government, said Julie Hill, a banking and commercial law professor at the University of Alabama.

“We saw Joe Biden — from the White House — telling the American people they were going to get to the bottom of the regulatory failures that happened and resulted in these banks’ failures,” Hill said. She added that regulators heard that message loud and clear.

Meanwhile, the survivors among regional banks have tried to manage the Federal Reserve’s higher interest rates, which triggered the crisis in the first place.

“Banks have been able to delay the pain by not passing on higher short-term interest rates that we’ve seen as a result of Fed policy to their customer deposits,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors.

But competition for deposits — that’s your money — is starting to heat up.

“And the regional banks are under a lot of pressure now to raise their deposit rates in order to retain their customers’ assets,” Suzuki said. That has the potential to hit regional bank profits.

But it’s a potential opportunity for consumers, said Mayra Rodríguez Valladares, managing principal at MRV Associates.

“They should be looking to see who offers more for regular checking, for savings and for certificates of deposit,” she explained. “Those depositors can walk.”

When it comes to the return on your money, she added, right now is a good time to shop around.

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