The news: Stocks of midsize banks in the US continued on a roller coaster ride this week despite the “non-bailout” bailouts of SVB and Signature Bank. With all eyes now on First Republic Bank, we dive into what’s going on there, what’s driving the panic, and how US consumers are feeling.
Fears at First Republic: Even after customers of the affected banks were guaranteed their deposits, and the Federal Reserve enacted an extraordinary lending facility, the Bank Term Funding Program (BTFP), shares of midsize US banks still see-sawed. First Republic Bank is taking the brunt of the turbulence.
Not a bank run—a bank sprint: The past week has seen the dissolution of two banks and a volatile market, in which regional bank stocks hit all-time lows. What’s going on, and how did this happen so quickly?
The event is a clear example of an affinity-type banking network gone wrong. Instead of startup founders supporting each other, they created panic and caused a run on SVB.
How are you feeling? A quickly executed poll by Reuters and Ipsos of 1,004 US consumers provides a bit of insight on how Americans are feeling about the chaos in the banking system, the government’s response, and if they feel their deposits are in danger.
The bottom line: Despite assurances from First Republic that deposits are safe, social media appears to be getting the better of peoples’ rational judgment. This likely stems from a lack of financial literacy and understanding how the banking system works. And sensationalism in social media further exacerbates the misunderstanding.
The Reuters poll shows some hope that some consumers understand the implications of a bank run and want to avoid any taxpayer bailouts. But spreading awareness is a challenge. It’s obvious that messages to remain calm can’t come from banks—the source of the chaos—and it doesn’t appear effective coming from the government either. It begs a hard-to-answer question: Where does financial education start, and who’s responsible for it?
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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