Nation Eyes Bank Failures Cautiously

The nation’s second-biggest-ever bank failure last Friday quickly captured the financial world’s attention, particularly when it was followed by a second failure.

California regulators seized control of Silicon Valley Bank following a run on the bank. Federal Deposit Insurance Corporation, now the receiver, will use the bank’s remaining assets to replace funds customers lost beyond the FDIC standard insured amount of $250,000.

Experts say Silicon Valley Bank ran into trouble because of investments in U.S. Treasury securities, when the normally safe investment was followed by a rapid increase in interest rates this year and last. The value of those securities plunged and the bank was unable to make up the difference.

A second institution, Signature Bank in New York, failed Sunday and was also placed under FDIC receivership.

Ernie Goss, Creighton University: “A lot of folks say, ‘Well, it’s not an issue for rural bankers.’ It is an issue. But I’d say it’s less of an issue…. If you do compare the banks in this part of the country to banks in other part of the country, I think the banks here stand up quite well, particularly again compared to banks that have been making loans to technology companies…. If I’m a farmer with more than $250,000 in one particular bank, I’ve got some concerns. If I have less than $250,000, I have little concern.”

A number of banks have failed in recent decades, particularly in 2008, but the assets involved with these two failures were noticeably larger than in most recent years, at a combined $319 billion.

By Colleen Bradford Krantz, colleen.krantz@iowapbs.org