March 30, 2023 at 11:51 a.m.
Wisconsin bankers comment on SVB and Signature Bank closures
By Trevor Greene-
According to the FDIC, no advance notice is given to the public when a bank is closed.
"To protect depositors, on Monday, March 13, 2023, the FDIC transferred all the deposits, both insured and uninsured, of Silicon Valley Bank to Silicon Valley Bridge Bank, National Association (NA), a full-service 'bridge bank' that will be operated by the FDIC as it markets the institution to potential bidders," a statement under the FDIC's Failed Bank List reads.
After SVB went into receivership, digital banking business Signature Bank in New York, N.Y. closed on March 12 by the New York State Department of Financial Services. The FDIC was again appointed as the receiver.
"To protect depositors, the FDIC transferred all the deposits and substantially all of the assets of Signature Bank to Signature Bridge Bank, NA, a full-service bank that will be operated by the FDIC," a different statement under the FDIC's Failed Bank List reads.
On March 20, the FDIC said it entered into a purchase and assumption agreement for "substantially all deposits and certain loan portfolios of Signature Bridge Bank, NA, by Flagstar Bank, NA," in Hicksville, N.Y.
All depositors of Signature Bank, according to the FDIC, automatically became depositors of Flagstar, NA, "which will continue to be insured by the FDIC up to the insurance limit" of $250,000.
Prior to its failure on Dec. 31, 2022, SVB was ranked by the FDIC by its consolidated assets to be the 16th largest bank in the United States. Signature Bank came in at 29th.
Safe, sound, resilient
In response to both bank closures, Wisconsin Bankers Association president and chief executive officer (CEO) Rose Oswald Poels released a statement dated March 13 assuring the public the state's banking system is "safe, sound, and resilient."
"Wisconsin banks do not operate in the manner that caused the failure of Silicon Valley Bank in Santa Clara, California and Signature Bank in New York, New York," Poels said. "The customer base of Wisconsin banks is much more diversified and the overall balance sheet management of Wisconsin banks is significantly different. Regulators acted swiftly and decisively, which protected customers of the failed banks and prevented further pain across the banking system."
Poels notes recent FDIC data which shows Wisconsin banks "are well capitalized and remain on solid footing."
IncredibleBank president and CEO Todd Nagel also issued a statement on March 14 to assure its customers.
"I'll start simply: your money is safe with IncredibleBank," he said. "Following the news about the failure of Silicon Valley Bank and Signature Bank, I want to assure you that we operate in a way that minimizes the bank's risks, and in turn, protects our customers - even in times of volatility."
The failure of SVB and Signature Bank, Nagel said, was a direct result of business practices not typical of most other banks.
Jerry Bybee, vice president of commercial banking for Nicolet National Bank-Minocqua, told The Lakeland Times he was more familiar with what happened with regard to the SVB situation and not so much with Signature Bank.
"This is just my opinion on what happened," he said. "And I think they're separate issues that each bank may have faced."
SVB, Bybee said, is a very specialized bank and it's especially different in comparison to banks in the Midwest.
"So Silicon Valley Bank was largely involved with doing IPOs, or initial public offerings, for start-up companies," he said. "Start-up companies are very risky and ... they would basically help the company get off the ground by helping them issue stock through a sale. So, very different from what we're used to in this part of the country, I'd say largely the whole country probably, where most banks don't get involved with that."
Most banks, Bybee explained, are charged with maintaining enough capital to "keep them afloat."
"And what I think Silicon Valley ran into is they had a lot of their capital invested in bonds," he said.
Bybee said since inflation "took off" two to three years ago the way the federal government tried to control it was to raise interest rates.
"So when the feds started raising interest rates, all the bonds people held as investments lost value," he said. "So as the capital they probably had invested in bonds went down in value they lost their capital base. And when a bank loses enough capital, or gets to a point where they're insolvent, the FDIC would step-in and take over and I believe that's what happened."
From what he's seen in the media, Bybee said the way SVB used bonds was ultimately its demise.
"The higher the interest rates go the less those bonds are going to be worth," he said.
Bybee said he is "very strong" in his opinion that most banks in Wisconsin and the surrounding region are in "very good condition."
Hypothetically, if one of the nation's biggest banks, like JP Morgan which according to the FDIC is the biggest bank, would fail, Bybee said he thinks it would have "a big ripple effect everywhere."
He stressed the importance for people to "know they're a bank" to understand the risks and strengths of each one.
"If customers have questions, my number one request is for them to go and talk to their bank because having those conversations is extremely important," Bybee said.
Trevor Greene may be reached via email at trevorgreene@lakelandtimes.com.
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