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‘Main Street’ Banks Remain Strong

Community Bank CEO Mark Tryniski talks about the collapse of Silicon Valley Bank, Signature Bank and the local banking industry

By Deborah Jeanne Sergeant

Q: Because of the crisis ignited by Silicon Valley Bank and Signature Bank, people are concerned with their money in banks. Is this a legitimate concern?

A: It’s certainly relevant given the events. It’s reasonable to always be concerned about your money. I think it’s not imprudent to be concerned and ask questions of your bank. There have been two or three bank failures to date, Silicon Valley being the first. I’d classify them differently. It’s important to understand there’s a difference between a Wall Street bank, specialty bank and mainstream bank. Silicon Valley and Signature were specialty banks. They’re a very large bank, did business almost solely with venture capital companies, IPOs and start-ups. Virtually all their customers were in that ecosystem of venture capital. Signature in New York, also a specialty bank, was very concentrated in New York City real estate and heavily invested in cryptocurrency.

Q: How do you assess the banking situation in Central New York?

A: If you look at the failed banks, including the most recent, Credit Suisse, a large Swiss international investment bank, it’s very different than what I’d call “main street banks.” It’s highly unlikely any concern will extend to any main street banks. They’re smaller, have business, personal and municipal and government customers. They don’t have concentration the same way Signature and Credit Suisse do. It’s highly unlikely this will extend to main street banks, which includes all in upstate.

Q: Do you think banks here may have the same fate as Silicon Valley Bank?

A: They’re more local. They’re not concentrated. Let’s say a bank only did business with construction companies. If that industry has a downturn, it’ll affect the bank. The concentration was the problem. Silicon Valley didn’t have any diversity — had only concentration and the one business they had investments with was having a downturn. It turned into a snowball effect. The other interesting thing is that banks don’t fail that quickly. In 48 hours, almost half of the customers of Silicon Valley tried to withdraw their deposit, which is unheard of. It’s one ecosystem they do business with and they all jumped on Slack and Twitter. It’s a live-by-the sword, die-by-the-sword outcome. Main street banks aren’t concentrated; don’t take the same risks. FDIC insurance is part of it. It covers up to $250,000 per account per bank. If you have more than $250,000, those deposits aren’t insured, but at Silicon Valley, the average deposits are over. Ninety-seven percent of their deposits were uninsured.

In our institution, 25% of deposits are uninsured. Most main street banks are like us. The vast majority are insured.

Q: What’s this crisis mean to inflation?

A: I think that it’s going to definitely dampen economic activity. Everyone’s concerned about liquidity. I think they’ll slow down with lending. The lending activity of banks will start to slow down, which could be potentially a headwind to economic growth.

Q: Can it trigger a recession?

A: I think the economy is too big. Banking is only one factor. It would be a contributing headwind to GDP growth.

Q: What’s your advice to consumers?

A: If you’re a main street bank customer with insured deposit, which is the vast majority of customers, you don’t need to do anything. Your deposits are insured. FDIC was created in 1933 after the Depression. There’s no risk to uninsured deposits in mainstream banks. Since the beginning of this crisis, our deposit balances are up. If you think about what’s going on, it’s been a very different experience. With a lot of other mainstream banks, their deposits are up a little bit. They’re not running out the door since a week and a half ago. There’s nothing for anyone to worry about.