TUPELO - The collapse of two banks over the weekend – and the subsequent moves by the FDIC and the Treasury Department to reassure consumers – isn't a sign of widespread problem in the financial system, Mississippi banking officials say.
“An over concentration in the technology sector is a major contributing factor to the problems at SVB," said Gordon Fellows, president and CEO of the Mississippi Bankers Association. "Mississippi’s banks are much more diverse in terms of their client base. In fact, Mississippi banks are well capitalized and well managed."
On Friday, California-based Silicon Valley Bank (SVB) was shut down by regulators as deposit outflows increased and the bank failed to raise needed capital. Primarily serving the tech sector, the nation's 16th largest bank had $209 billion in assets and $175.4 billion in deposits, but concerns grew as deposit withdrawals had snowballed, threatening its stability.
Meanwhile, New York-based Signature, which served many crypto currency clients, was shuttered Sunday after its shares fell more than 16%.
"It’s important for Mississippians to remember that FDIC-insured bank accounts are the safest place money can be kept," Fellows said. "The FDIC has been insuring bank accounts for nearly 90 years, and no depositor has ever lost money in an FDIC-insured account."
In an effort to shore up confidence in the banking system, the Treasury Department, Federal Reserve and FDIC said Sunday that all SVB clients would be protected and able to access their money.
“This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement.
Under the plan, depositors at SVB and Signature Bank, including those whose holdings exceed the $250,000 insurance limit, will be able to access their money on Monday.
The Treasury set aside $25 billion to offset any losses incurred, but Fed officials said they do not expect to have to use any of that money, given that the securities posted as collateral have a very low risk of default.
Though Sunday’s steps marked the most extensive government intervention in the banking system since the 2008 financial crisis, the actions are relatively limited compared with what was done 15 years ago. The two failed banks themselves have not been rescued, and taxpayer money has not been provided to them.
Two of Mississippi's largest banks said their customers need not worry.
Cadence Bank Chairman and CEO Dan Rollins said the $48 billion bank is a picture of stability.
“Cadence Bank has been dependably serving customers for nearly 150 years. Today we operate across nine states, which are among some of the top-performing in the nation," he said. "Over the years, Cadence Bank has been a stable presence in the communities we serve through multiple economic cycles, natural disasters and changing banking dynamics."
Mitch Waycaster, president and CEO of Renasant Bank, likewise said his $17 billion financial institution was prudent in its management.
"Our conservative, diversified approach to banking is designed tenable us to withstand shocks to the banking system and broader economy," he said.
SVB was large but had a unique existence by servicing nearly exclusively the technology world and venture capital-backed companies. It did a lot of work with the particular part of the economy that was hit hard in the past year.
Other banks are far more diversified across multiple industries, customer bases and geographies. The most recent round of “stress tests” by the Federal Reserve of the largest banks and financial institutions showed that all of them would survive a deep recession and a significant rise in unemployment.
Waycaster said Renasant's way of banking helps it maintain "high levels of capital with a stable deposit base, diversified client portfolio and regional footprint that creates a safe and sound financial institution for customers' assets."
The Associated Press contributed to this report.
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