The fast-moving developments surrounding the Silicon Valley (SVB) and Signature (SBNY) bank failures, along with warnings regarding the stability of Credit Suisse (CS), have roiled stock and bond markets around the globe, raising questions regarding the health and well-being of banking sectors both at home and abroad. While poor asset/liability management and imprudent industry concentration (Venture Capital-backed technology and cryptocurrency) rendered both SVB and SBNY unable to meet depositor redemptions during a classic ‘run on the bank’ scenario, market participants remain on edge and concerned that these high-profile collapses may be the start of a wider contagion that could stifle economic growth and tip the world’s largest economy into recession. On the one hand, it appears that the unique circumstances surrounding the failures of SVB and SBNY have not spread to the broader regional/community bank sector, in no small measure due to the Federal government’s extraordinary measures to calm the nation’s depositors, namely the creation of a new, Bank Term Liquidity Fund (BTLF) established as a supplemental source of funds to meet excess depositor withdrawals.
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