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Bankers CEO: Recent Troubles a Panic, not a Problem

The Consumer Bankers Assoc. president says social media sparked a panic, but the industry’s two unique bankruptcies had “a very specific demographic of depositors.”

NEW YORK (AP) – Lindsey Johnson became president of the Consumer Bankers Association in 2022, representing the trade and lobbying organization for the nation’s big retail banks like Bank of America, Wells Fargo, US Bank, PNC and others. Before she joined CBA, she was president of the trade association for the mortgage insurance industry.

She spoke to The Associated Press during the CBA’s annual conference in Las Vegas, the first industry-wide gathering since the collapse of Silicon Valley Bank and Signature Bank.

The interview has been edited for length and clarity.

Question: What’s the talk among your member banks as the industry faces its biggest test since the Great Recession?

Answer: We went in on planning this conference around the idea of “what’s next” for banking, which last year was all about the economy and what’s going to happen to interest rates. But these failures made us have to alter our agenda, no doubt about that. We’ve had more of these unique black swan events, and bankers see it as their mission to be prepared for these events when they happen.

Question: How has the failure of Silicon Valley Bank and Signature Bank impacted how people see the broader industry?

Answer: I think there’s been a lot of misinformation about the industry as a whole with these two banks’ failures. These two banks had a very specific demographic of depositors that is very different from every other bank. Most banks know you need to have a very diverse deposit base, and that you need to protect yourself against interest-rate risk, which these banks didn’t do. The conversations I’m having are focused around making sure you have a diverse deposit base, and more importantly, how do you plan to make sure that your risks are well managed.

Question: You put out a statement after those banks failed calling what happened a Twitter bank run. What did you mean by that?

Answer: Other bank runs we’ve had in history, like Continental Illinois or Washington Mutual, took days, weeks for them to happen. And in those cases, it was about bad loans that hurt those banks. These banks’ failures were entirely different. It was just fear and uncertainty that spiraled out of control. And in Silicon Valley Bank’s case, you had a group of depositors who had a bit of a groupthink mentality, where if one pulled out, the rest did so as well.

Question: At this point, things seem to be stabilizing a bit. Deposits aren’t flowing out from the banks as much, the emergency facilities by the Federal Reserve are being less used. Why do you think things are calming?

Answer: I think regulators have done a much better job at telling the public that our nation’s banking system is strong and not every bank is the same as Silicon Valley Bank. I think our banks also did a good job at differentiating themselves from the failed banks, making sure people understood the difference.

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