Experts say Tri-State likely to be unaffected by California bank collapse

Experts say Tri-State likely to be unaffected by California bank collapse
Published: Mar. 13, 2023 at 6:47 PM CDT
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EVANSVILLE, Ind. (WFIE) - The collapse of Silicon Valley Bank, or SVB, has experts worried about the effect it could have on the banking industry and the economy at-large.

Local experts think despite how significant an event this is, it’s unlikely to affect people in the tri-state.

Matt Finn, chief economist for Old National Bank, explains a lot of cash suddenly entered the economy during the pandemic, due to government payments and more. He says when the cash hit banks, they lent out as much as they could, and invested the rest.

Finn says since then, many of SVB’s clients started to pull out their money since higher interest rates made it harder to borrow funds.

To meet demand, SVB had to sell their investments prematurely, causing a loss which cut further and further into the bank’s capital.

“Investors increasingly started to become worried about the safety and soundness of the bank and began withdrawing ever-larger amounts of money from the bank, and pretty soon it became obvious that they couldn’t meet the demand and so the government stepped in and took it over,” said Finn.

Finn says for this to happen, a lot of strain would have to be put on specific industries, and a bank would have to cater primarily to those industries. He say the California-based SVB primarily served tech companies, venture capitalists, and start-ups.

Finn says that isn’t worry in the Tri-State.

“Banks in the Midwest are in a different sort of lending environment, a different sort of deposit environment, and really it shouldn’t be a problem,” said Finn. He says SVB’s failure has highlighted the importance of best practices in banking.

“At the end of the day, safety and soundness and good banking principles rule over everything else,” said Finn.

Finn says the federal reserve is on guard to keep the effects of the bank closure from spreading through the financial system, but he says that seems unlikely.