The sudden collapse of Silicon Valley Bank (NASDAQ: SIVB) has sent shockwaves through the business community, sent financial stocks tumbling and raised new questions about the resilience of regional banks. In this environment, regional bank leaders, including communications executives, should consider best practices for bank communications over the next several days.
9 COMMUNICATIONS BEST PRACTICES FOR REGIONAL BANK LEADERS
- Over-communicate. Put filings and public statements on the home page of your website—above the fold—and post them to other owned communications channels. Make any available information easy for stakeholders to understand and access—including depositors. Accessible and digestible messaging facilitates rapid information sharing. The speed of your communications is important.
- Again, don’t delay. Put a plan in place now to share simple and direct messages with key stakeholders on their platform of choice. Execute that plan the moment news and social media monitoring pick up spreading speculation that could question the bank. A comprehensive communications plan is both critical and one of the only risk mitigation techniques available for managing the impact and speed of social media conversation in today’s environment.
- Ensure that your investor relations, communications, and business leaders are connected internally and working together as a team, using consistent messages and common assets. When possible, be together in person.
- Provide plain language summaries of your regulatory filings so that your depositors can easily understand the situation and what you’re doing. Work with your investor relations team so that the filing itself is easy to understand for most people. A statement that might reassure investors may be perceived differently by anxious customers.
- Address negative speculation from influential sources directly and immediately. Take steps to shut it down.
- Communicate directly to clients and stakeholders. Ensuring a clear, accurate, and aligned narrative that leaves no room for rumor or speculation. Relying on indirect communications channels slows message distribution and reduces clarity.
- Your narrative must be action-oriented and emphasize what you are doing to maintain or strengthen the bank’s positions. Signal confidence and provide data and information regarding the stability of your deposits.
- Use outside validators to help allay any concerns, amplify key messages, and demonstrate for stakeholders that there is support in the marketplace.
- Use the communications tools and channels that will reach your key stakeholder immediately. Go where they are.
BACKGROUND
Over 48 hours, the 40-year-old Silicon Valley Bank’s market capitalization decreased from $16 billion to just $6 billion, becoming the second-largest bank failure in American history when the FDIC seized control of deposits on Friday, behind only Washington Mutual’s 2008 collapse amid the financial crisis. At its peak, SIVB had a market cap of over $44 billion.
The Santa Clara-based bank, a subsidiary of SVB Financial Group, that focused heavily on serving the start-up ecosystem, announced a capital raise on Wednesday in light of a $1.8 billion loss from the sale of securities. The majority of the $21 billion securities sale were bonds, which have lost value in the face of rising interest rates and a slowdown in venture capital lending.
This announcement sent SIVB stock tumbling (trading is currently halted), which drove customers to rapidly pull deposits and caused a liquidity crisis. Due to the high percentage of large, venture-capital-based deposits SIVB had on its balance sheet, it was uniquely vulnerable to a bank run. In fact, according to S&P Global Market Intelligence, as of the fourth quarter of 2022, just 2.7% of SIVP’s deposits were less than the $250,000 FDIC insurance limit. In contrast, Bank of America reported 31% of deposits below the $250,000 threshold as of December 31st, 2022.
The hit to Silicon Valley Bank—coupled with crypto bank Silvergate's decision to wind down operations and liquidate this week—has dragged down bank equity worldwide, including juggernauts Goldman Sachs, JPMorgan Chase and Bank of America. But America’s regional banks may face the most immediate risk.
While larger institutions are typically more diversified with deeper balance sheets—putting them in a stronger position to manage risk—other banks may soon find themselves the target of uncomfortable speculation if they start to recognize losses on securities portfolios, experience material deposit outflows or become the focus of social media conversation. Further, banks with a more homogenous depositor base could find themselves similarly vulnerable if liquidity fears spark a run.
Further Reading
- Wall Street Braces for the Next Silicon Valley Bank
- FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank, Santa Clara, California
- Silicon Valley Bank Fails After Run by Venture Capital Customers
- Silicon Valley Bank Closed by Regulators
Edelman Smithfield’s subject matter experts work with clients in the banking sector to help bolster their reputation and ensure they are clearly communicating with all stakeholders. For more information, contact Chris Donahoe, executive vice president and co-head of U.S. operations, at chris.donahoe@edelmansmithfield.com or click here to get in touch.