Broker Check

Perspective on Recent Bank Closures

March 13, 2023

You have likely seen in the ongoing news that some bank closures have occurred in recent days.  As your financial partner, we are committed to following events that can affect you and your portfolio. Keeping our clients informed and offering solid perspectives during events like these are an important part of what we do. We know there are people attached to the assets we manage.

What happened?

On March 8, California’s Silvergate Bank, which catered to cryptocurrency exchanges and clients announced that following the fall of cryptocurrencies, the bank would liquidate and close. Two days later, Silicon Valley Bank, a bank headquartered in Santa Clara, California, was placed into Federal Deposit Insurance Corporation (FDIC) receivership. Silicon Valley Bank’s customers were almost exclusively venture capital and emerging tech companies. Late yesterday, New York-based Signature Bank, also a bank tied closely to cryptocurrencies, was also placed into receivership. This marked the third bank to close in less than a week.

Why is it happening?

While some of this may appear to be new, it isn’t as new as it seems. Much of it can be explained by the lack of diversification. These banks dealt in concentrated asset classes and customers. The underlying assets were also highly correlated and extremely volatile. Given the significant declines in venture capital activity along with cryptocurrency losses, these banks came under balance sheet pressure and the withdrawal of deposits. 

We know that news of bank failures is unsettling to both markets and investors. It is important to remember that the vast majority of banks are not the type of specialty banks that are involved here. Most banks are more diversified. The banking industry is also highly regulated. When the Fed and bank regulators step in, it is to protect depositors and the health of the banking system.         

What now?

The government has acted quickly. While none of the financial institutions that have closed are designated as banks that are “too big to fail,” the Fed and bank regulators apparently understand the dangers of the knock-on effects of their closure. Janet Yellen, U.S. Secretary of the Treasury, appeared on Face the Nation on Sunday. Yes, we read the transcript. She said, “Let me just say that we want to make sure that the troubles that exist at one bank don't create contagion to others that are sound.”

Last night, several government actions were announced.  The Federal Reserve, FDIC and Treasury said in a joint statement regarding the failed institutions, “all depositors will have access to their money and that no losses will be borne by the taxpayers.” The government also announced significant programs and credit facilities to aid banks during this period of deposit volatility. It is good to see quick, coordinated, and decisive steps being taken to address volatility and protect banks and their depositors.


Strong principles can get one through almost anything.

We have been through a lot over the past few years. We have seen a global pandemic and recovery. We have been through both falling and rising interest rate environments and equity markets. Given these most recent events, a natural question is, “What do we do now?”

In our client letters over the years, we have often said that “strong principles can get one through almost anything,” and they have. We build portfolios that are risk aware. In stark contrast to recent banking events, we believe in broad diversification. While no one can predict short-term movements in the markets, we try to steer clear of exotic assets and “hot” stocks. We also believe in discipline and restraint in both building and adjusting portfolios.

We are here.

We are not dismissive of the recent developments. We know that disturbing news and market reactions aren’t pleasant. We take them seriously. If you would like to talk things over, we are here for you.



Sources; Wall Street Journal, Fed Reserve, Fed Deposit Insurance Corp, The Economist, CBS News, CNBC, US Treasury.