(WIVB) – The sudden collapse of two banks is sending shock waves across the financial community. Silicon Valley Bank, which finances tech companies, went down on Friday. Then on Sunday, Signature Bank in New York City followed. SVB announced almost $2 billion in losses last week, which sparked a run on withdrawals that the bank could not handle.
On Monday, President Joe Biden promised that management of the failed banks will be fired,
and any bank customer, even people with balances more than $250,000 will be made whole.
Local financial experts are weighing in on the bank run and what it could mean for people in Western New York.
Economics and finance professors say for the average person, this is not a huge concern. That’s because anything less than $250K is insured by the FDIC.
“The system is really created to safeguard the every day person more than ever before,” said Buffalo State University economics professor Joelle Leclaire.
Professor Fred Floss also says the majority of people shouldn’t worry too much. He says retirement funds could potentially be a concern and that over the next few days people’s investments will likely fluctuate as a result of the bank run.
“So we might see some short term blimps across the country as things start to adjust,” he said. “But people should really keep their money in the bank, they should look at their 401k’s and decide do I want to have my allocation in stocks and bonds, where do I want to put them.”
“Most people are going to be well diversified and they’re going to find they have very little problem with their 401k but it’s something you should look at,” he added.
“So the other channels it could affect us through, like for every day middle income people, it could affect us through our retirement income,” Leclaire said. “If the asset prices fall dramatically in the stock market, then those of us, especially close to retirement might be affected because the value of our total assets in our retirement portfolio would go down.”
Leclaire says she wouldn’t call this a banking or financial crisis.
“I wouldn’t say it’s even a panic yet, but it could cause a panic and it could cause a financial crisis if we don’t stop it right now,” she said.
However, she does say, that what happened with silicon valley bank and signature bank is typically what does end up starting one. Leclaire says the major difference here is with how quickly the federal government and the president have stepped in to provide relief to the banks, company’s and people affected.
News 4 reached out to KeyBank to get their reaction. The CEO released a statement saying:
Key is well capitalized, with strong credit quality and deposit profiles. KeyBank has a moderate risk profile with a wide range of funding sources and a very diversified deposit base. Regional banks like KeyBank are subject to a high level of regulation and take part in annual stress tests where banks have to prove their durability through a myriad of negative economic scenarios. We are actively monitoring the situation and are not seeing anything unusual in terms of deposit flows across our businesses. In fact, our team has mobilized quickly to support and onboard many new, high quality clients.
Key is a nearly 200 year old financial institution with safe, sound and strong fundamentals. While the events of the last few days have been disconcerting, it’s important to note that they are limited to small number of niche banks with unique, highly concentrated financial profiles. KeyBank, as well as other regional banks, are in a much different, more diversified and stronger financial position. Despite the recent events in our industry, KeyBank is well positioned to continue supporting all our clients with a full range of financing options while maintaining our moderate risk profile and delivering value to our shareholders.Chris Gorman, Chairman and CEO of KeyCorp
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Sarah Minkewicz is an Emmy-nominated reporter and Buffalo native who has been a part of the News 4 team since 2019. Follow Sarah on Twitter @SarahMinkewicz and click here to see more of her work.