Regional Banks Slammed by Fear of a Broader Financial Crisis Across the country, banks of various sizes are battling market turmoil as customers rushed to withdraw their deposits and investors, worried about more bank runs, dumped bank stocks...... The unexpected seizure of two banks in three days by regulators intensified fears of a broader financial crisis, sending the stocks of more than two dozen banks into free fall on Monday, even as President Biden reassured Americans that the banking system was resilient and that customers’ money was safe. ....... protect depositors without rewarding risk-taking executives and investors. ........the KBW Bank Index, a proxy for the industry, down nearly 12 percent. On a day when the S&P 500 stock index ended up flat, shares of First Republic tumbled 60 percent and Western Alliance slumped 45 percent. ....... the 2008 financial crisis, when 465 banks failed within four years, sometimes dozens in a month ....... the banks whose stocks tanked had enough funds to meet their obligations. ........ Last week, Silvergate, a cryptocurrency focused bank, said it would shut down; between Friday and Sunday, the government seized Silicon Valley Bank and Signature Bank. ....... The Federal Reserve Bank of San Francisco, on whose board the former chief executive of Silicon Valley Bank, Gregory Becker, sat until Friday, was responsible for supervising the failed bank............. “The events surrounding Silicon Valley Bank demand a thorough, transparent and swift review by the Federal Reserve,” Jerome H. Powell, chairman of the Federal Reserve ......... Silicon Valley Bank had roughly $175 billion in deposits before last week, and Signature had under $100 billion before it was shut down. ........ Anticipating a blood bath on Monday, First Republic, the nation’s 14th largest bank, said a day earlier that it could grab $70 billion if needed from sources including the Federal Reserve and JPMorgan Chase, the nation’s largest bank by assets. Its shares still lost nearly three-fifths of their value on Monday — at one point touching $30, a low they had not touched since the end of 2010. .......... “On each coast, we have bank failures that are uniquely focused on very wealthy and very connected industries.” ....... On Sunday, the F.D.I.C. said that all customers of Silicon Valley Bank and Signature Bank with deposits above $250,000 would be made whole. ......... Bigger banks had little interest in the $1.1 million loan he needed — puny by their standards ....... .
Preventing panic in the banking sector A government-organized deposit guarantee should tame the animal spirits. .
3 Lessons From Silicon Valley Bank’s Failure Here’s one takeaway: The bank’s extremely online clientele may have contributed to its downfall....... The bank had a gold-plated reputation inside the Silicon Valley start-up scene.... ...... was a Silicon Valley institution, and that it counted many of the tech industry’s best-known start-ups and investment firms as its clients ...... what brought S.V.B. down wasn’t lending to risky start-ups, or gambling on sketchy crypto coins, or some other ill-considered tech scheme. It was an old-fashioned bank run, set off back in 2021 by a series of old-fashioned bad decisions......... It was known for taking a risk on start-ups that no other banks would touch. ....... as it collapsed, start-up founders told stories of how they’d gotten their first business loans or their first credit cards from Silicon Valley Bank. Some tech workers got their home mortgages and car loans there. ........ and the entire start-up ecosystem collapses because many cannot make payroll — could be catastrophic......... Silicon Valley Bank’s extremely online clientele may have contributed to its downfall. ........ At most normal, midsize regional banks, what happened at S.V.B. probably wouldn’t have led to a panic. Banks sell assets all the time. They run into liquidity problems and raise short-term capital to solve them. Most of the time, customers never notice or care. ........... talk to each other on the internet all day. Once a few people in tech raised questions about the firm’s solvency, Slack channels and Twitter feeds lit up with dire warnings from venture capitalists, and soon many people were panicking. ......... the clubby, herd-following nature of the industry it served. ....... With any luck, a big bank will subsume the old S.V.B. seamlessly, make its larger depositors whole, and there will be no domino effect — no taxpayer bailouts, no mass start-up failures, just a simple and orderly bank failure. ......
Silicon Valley will have regulation to thank for its survival..
Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe. Place SVB with a Top 4 bank. Do this before Monday open or there will be contagion and the crisis will spread.— David Sacks (@DavidSacks) March 10, 2023
It’s tragic that Silicon Valley Bank could lose 80%+ of its value in a single day.— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
But what’s crazy is that the financial collapse was largely driven by a communication collapse.
Their storyline unraveled and their messaging went off the rails, in 4 big ways.
(continued below) https://t.co/TB9aKdgpqj
SVB made the responsible decision to strengthen its financial position with a cap raise.— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
It made sense.
Where things went terribly wrong was the communication, specifically:
(1) WHAT they said, (2) WHO the audience was, (3) WHEN they did it, and (4) HOW they framed it.
The SVB press release made no mention of their reasons for the raise, any further context, or any reassurance about the strength of the business otherwise.— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
It was all numbers, no narrative.
SVB also filed a form 8-K with the SEC, to disclose a significant event to investors…
Their 8-K was pretty good! It did include a clear description of the company’s liquidity strategy, rationale for fundraising, and strong capital position.— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
But the problem is that the 8-K didn’t get through to a lot of their customers (startups) and influencers (VCs).
SVB dropped their biggest, most intricate, most unnerving news of the year — without any meaningful reassurance to their core customers (startup founders, especially early stage) and the people they listen to the most (influential VCs).— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
That became the second comms failure…
2) WHO the audience was:— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
SVB seems to have prioritized protecting the stock price. An 8-K and press release speak to regulators, analysts, and banks.
But they missed a key audience: customers.
A stock drop is painful, but it’s nothing compared to not having customers.
SVB’s core customer is tech startups. They don’t get their news from press releases or the SEC!— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
Startup founders are not digging through EDGAR.
They’re around digital water coolers. They get scuttlebutt from group chats, Twitter, HN, Reddit, tech pubs, direct channels, and VCs.
3) WHEN they did it:— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
Timing might have been SVB’s undoing. They dropped the news on Wednesday evening, right on the heels of the Silvergate collapse, and thus lumped the two together.
When analyzing complex situations, people (and banks!) look for proxies and comparables.
The last comms collapse is— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
4) HOW they framed it:
As I said above, SVB initially gave hardly any framing at all. The press release was all numbers, no narrative.
SVB then stayed quiet as worries rose overnight. News is 24/7 now — there’s no reason to wait until business hours.
Almost a full day later, SVB’s CEO told customers to “stay calm.”— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
You know how the best way to take people from annoyed to furious is to tell them to calm down?
There’s also no better way to take people from worried to panicked.
If the “stay calm” messaging wasn’t enough invitation to panic, SVB added on the suggestion that “everyone is telling each other SVB is in trouble.”— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
If you want to get people to do something, offer social proof: “everyone else is doing it.” This was social proof for fleeing SVB.
Can good comms save an otherwise bad situation? No, there's no amount of "going direct" that can make up for a bank not having enough money.— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
But bad comms can kill an otherwise salvageable situation.
SVB’s core customers are early stage startup founders, and instead of going direct they were communicating via EDGAR 😞— Lulu Cheng Meservey (@lulumeservey) March 10, 2023
Yeah I got a text from a friend in the UK saying "my bank stocks just dropped, did something happen?"— Lulu Cheng Meservey (@lulumeservey) March 11, 2023
Thank you!— Lulu Cheng Meservey (@lulumeservey) March 11, 2023
Yes.— Truth Signal (@de_bose) March 10, 2023
This is from “EVP Corporate Affairs & CCO Activision”. Lol.
Why so many rich kids (& nepotistic kids) end up in tech management, probably without practicing any actual tech & finance. pic.twitter.com/QFJO1woOVK
Read more about the history of Silicon Valley Bank here in my essay: https://t.co/WFvDnkOudv— Peter Ryan (@_PeterRyan) March 10, 2023
FDIC said today that SVB had _both_ "inadequate liquidity and insolvency.— Audun Utengen (@audvin) March 10, 2023
No amount of PR could have fixed that.
The US has had 562, now 563, bank failures since 2001. Canada has had 2 bank failures in the last 100 years. Our market is small but the US issue is a lack of centralized regulation and management run amok.— Darren Bieganek (@dbieganek) March 11, 2023
It was driven by government policy that devalued the assets that the government encouraged them to buy. Don't get this wrong.— Joe (@c64f7e94) March 10, 2023
March 10, 2023
an alternative explanation: management knew exactly what they are doing (they have excellent lawyers; they sold their shares by the millions 2 weeks ago). If someone would check put options big winners, it might shed more light.. [always check who makes profit from a situation).— Romemos (@romemos) March 10, 2023
Real problem was a huge VC bubble, leading to shameless exits soaking up retail COVID money. Fed saw this and popped the bubble. But VCs wouldn't stop …— Biographica (@bgrphc) March 10, 2023
They had no problem increasing fees 6X for small startups. They were awful.— ANNnonymous (@AnnGreenberg) March 10, 2023
At @NOLAbookfest , Bill Gates talks about why he is now back involved with Microsoft product reviews — because of AI. pic.twitter.com/e0g03Nzmv4— Walter Isaacson (@WalterIsaacson) March 10, 2023
Great to see @FLOTUS celebrate the joy of reading at @NOLABookFest, Mardi Gras for the mind at @Tulane!! pic.twitter.com/A96MhkdtwI— NOLA Book Festival (@NOLAbookfest) March 10, 2023
#InternationalWomensDay 5 public relations lessons from @WalterIsaacson 's book on Jennifer Doudna and the CRISPR revolution https://t.co/x3KSpV7VQp #Doudna #PR #Science— Magdalena Day (@magdalenaday) March 8, 2023
The importance of knowing the train schedule, Lake Pontchartrain, New Orleans pic.twitter.com/mib7F8ZJSE— Marco (@marcorasi1960) February 28, 2023
A Doodle Reveals da Vinci’s Early Deconstruction of Gravity https://t.co/Tk5Mp3gDb4— Walter Isaacson (@WalterIsaacson) February 19, 2023
In case you wonder what @jmart and @BFischerMartin do when not reporting on politics. @politico pic.twitter.com/VVec0DOGj4— Walter Isaacson (@WalterIsaacson) February 19, 2023
Investor @Billbrowder speaks with @WalterIsaacson about the effectiveness of the NATO allies’ sanctions on Russia and the pace of NATO's assistance to Ukraine at this critical juncture. https://t.co/V5cFPPYUam— Amanpour and Company (@AmanpourCoPBS) February 15, 2023
A wonderful tribute by @doudna_lab’s Jennifer Doudna to Barbara McClintock and to life. https://t.co/7O2aYGgO88— Walter Isaacson (@WalterIsaacson) February 13, 2023
Thus far, this is an extremely haphazard alien invasion— Aaron Levie (@levie) February 12, 2023
Here’s the lecture for my @Tulane class today on the digital revolution, with @StevenLevy’s Hackers as the assigned text. Also, the next one #13 on the playlist, which is about Atari and Ping. 12. Video games: Spacewar https://t.co/5wtnSS0d0T via @YouTube— Walter Isaacson (@WalterIsaacson) February 9, 2023
A global liberal arts education is the best preparation for the challenges of a complex international landscape. I am proud that @TulaneSLA is taking the lead in bringing these at-risk scholars from #Afghanistan and #Egypt to #Tulane https://t.co/1f5s1er4Sq— Brian T. Edwards (@briantedwards) February 8, 2023
When rivers converge. From The Code Breaker. pic.twitter.com/NhBEZu1pA6— Walter Isaacson (@WalterIsaacson) February 5, 2023
Richard Holbrooke, the Last Great Freewheeling Diplomat - The New York Times https://t.co/FILeY2ttNy— Walter Isaacson (@WalterIsaacson) January 29, 2023
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