Local financial experts see no cause for alarm from SVB failure

Andy Knight, The Herald Bulletin, Anderson, Ind.
·2 min read

Mar. 18—ANDERSON — As domestic and international markets struggled to regain their footing in the wake of the collapse of two U.S. banks, local financial advisors and banking executives said that while there are legitimate concerns about the circumstances that led to their demise, there's no cause for alarm on the part of their customers.

"I think the greater concern for me is, is the Federal Reserve going to raise interest rates too quickly and cause a recession?" said Philip Lavelle, an Anderson-based financial advisor with Thurston Springer Financial in Indianapolis.

Lavelle said recent speculation has centered on how steep the Fed's next rate hike might be, noting that many financial experts are expecting about a half-point increase. The collapse of the two banks — Silicon Valley Bank in California and Signature Bank in New York — may prompt the Fed to reconsider, he said.

"It's kind of been relief, or expectation, that the Federal Reserve may not be as aggressive with rate hikes because these two banks failing may help to moderate inflation," Lavelle said.

Executives at local banks have taken the week's news and resulting market volatility in stride, pointing out that the two banks that failed had investment portfolios — catering mainly to technology workers and companies with venture capital backing — that were fundamentally different from their holdings.

"The closed banks had unique risk profiles that are unlike the risk profile of First Merchants Bank," said Mike Stewart, president of First Merchants. "We are keeping an eye on the special programs and measures by federal regulators to ensure financial industry stability."

Stewart said First Merchants branches in Indiana and three other states have been operating under "business-as-usual" protocols, but that employees have been furnished with answers to common questions on the topic that customers may have.

Lavelle said another factor in the demise of SVB and Signature — the second biggest bank failure in U.S. history — is likely a lack of diversity in customers to whom those banks were lending money.

"I believe their exposure to cryptocurrency-related companies was really what doomed them," he said. "They are not diversified banks. They have a very unique niche of clients that they serve, and I think that's really what brought them down."

In other words, Lavelle said, larger national and regional banks are not at risk.

"I guess the word would be this (situation) is not indicative of systemic risk," he said. "It's just very localized and specialized."

Follow Andy Knight on Twitter @Andrew_J_Knight, or call 765-640-4809.