An open letter from Social Assurance Founder and CEO Ben Pankonin, plus messaging resources and talking points for banks needing to communicate with their customers and communities urgently.
Like many of you, I watched with a knot in my stomach as the events of last week unfolded. In less than 48 hours, Silicon Valley Bank–the 16th largest bank in the U.S. and previously among Forbes’s list of top financial institutions–was shuttered by regulators. The headlines are still abuzz: The second-biggest bank failure in U.S. history. For consumers and the banking community alike, it’s jarring news. At this moment, bank customers need to understand that this was a unique circumstance impacting a specific type of bank with an unusual portfolio. Above all of that, they need to know they’re in safe hands with community banks. And they need to know why.
Some Important Context
It’s especially important that front-line staff are positioned to speak knowledgeably about SVB and its unique situation–which is very different than that of most community banks. Certainly, SVB’s deposits were primarily in one industry; that is, they were not very well diversified. To make matters worse, SVB invested heavily in mortgage backed securities and government bonds that decreased in value. The result was a scenario where SVB sought to raise additional funds, which it communicated in a press release on March 8, 2023. The response was swift, with high-profile and influential investors taking to social media with accusations of insolvency. The resulting bank run on deposits led to the state regulatory agency officially revoking SVB’s charter on March 10th, transferring the business into receivership under the FDIC. The FDIC created a new bank to house its insured deposits, announcing that it would begin covering uninsured deposits with special dividends.
Public Response & Consumer Knowledge
The situation reflects a couple of key evolutions in public communication and access to capital and banking services over the last 10 years. Never has information been so publicly accessible so quickly. What’s more, the opinions of individual investors, entrepreneurs, portfolio managers, and others can be published to audiences of millions instantly thanks to social media. With followers engaging and sharing in real-time, suffice to say that news and opinions–no matter how reliable–spread incredibly quickly. At the same time, the banking industry has experienced something of a digital transformation in which people no longer need to drive to the bank and head into the lobby to execute a transaction. Indeed, withdrawals can happen with a few simple taps.
Public response to SVB’s unique circumstances has been complicated, likely due to several factors. First, SVB’s portfolio consisted almost entirely of high-profile tech startups–many backed by big names in VC and celebrities. If the second-largest bank collapse in history wasn’t a big enough headline to begin with, the network of folks impacted certainly leads to more and more headlines. There is also a bit of a knowledge gap for many consumers and even businesspeople regarding how banks fundamentally operate–how their assets are managed and the risk profile requirements under which they must remain in compliance. Despite the release of a joint statement by the Department of the Treasury, Federal Reserve, and FDIC confirming the U.S. banking system remains resilient (due in large part to reforms instituted after the financial crisis), misconceptions abound when it comes to how financial institutions are regulated and insured. This became especially evident when misinformed investors took to Twitter to bash the FDIC–lacking a key understanding of how losses for uninsured funds are covered. This is important for banks to keep in mind as they communicate and interface with potentially worried customers.
What Banks Need to Do Now
At this time, banks need to reassure their customers and communities. There are plenty of ways to do that in the short- and long-term, but financial stability, diversification, and relationships to customers are critical talking points. This means a combination of action items are in order for banks, starting with educating staff and providing consistent messaging across internal and external bank communications and channels–including social media. Stated another way, social media is where news and information about this specific event is traveling fastest and most effectively, making your bank’s calming presence especially important on this channel. You’ll need to highlight some of the key factors contributing to SVB’s unique situation and draw clear distinctions between its position and your bank’s. You’ll also need to provide some education around the industry’s regulatory protocols and your bank’s compliance position.
Sample Talking Points for Banks
- On March 10, 2023, the FDIC took control of deposits held at Silicon Valley Bank in Santa Clara, California amid a series of unique circumstances that led to its collapse. We recognize that our customers may have questions about the security of their deposits and want to offer some timely context and important information.
- Banking experts, regulators, and state/federal agencies continue to emphasize the unique circumstances facing Silicon Valley Bank. The industry as a whole has become substantially more resilient over the last 10 to 15 years due in large part to a number of regulations aimed at protecting consumers and small businesses. In short, regulators require stronger and more conservative capital and risk profiles.
- Silicon Valley Bank was highly specialized in serving venture capital firms and technology startups. We serve customers across a variety of diverse industries, business models, and business types. This diversification ensures a consistently strong capital position.
- In response to the sudden closure of Silicon Valley Bank, we want to assure you that our capacity to preserve and protect your funds is and remains strong. Our bank is especially well-capitalized, in addition to having ample available liquidity. These conditions ensure that your accounts and funds remain protected amid uncertainty.
- As an FDIC-insured bank, deposits are automatically insured up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category (e.g. single, joint, trust, business, employee benefit, and certain retirement accounts). The www.fdic.gov website provides information on insurance rules, limits, and coverage by account type. We are also here to help you assess, understand, and structure your deposit accounts to ensure FDIC coverage.
- We are here for you and available to talk through your specific needs now and in the future. We’re proud to serve the community and hold close relationships with many of its civic leaders, business owners, entrepreneurs, students, families, and community members.
Tips for Communicating on Social Channels
- Put out a formal communication addressing all details (perhaps a blog or press release), then link to it on social media.
- Consider putting out a communication directly from the bank’s social media channels, then ask your leadership, business development, and lending teams to share it across their personal accounts. Consider a post along these lines: “In the wake of last week’s closure of Silicon Valley Bank, our customers may have concerns about the security of their deposits at Your Bank Name. We are proud to offer our customers and community assurance and guidance that their hard-earned dollars are in safe hands. Please read the full update linked below for additional details about this unique situation and some key distinctions in how we operate.”
- Feature a quote from a long-standing and well-recognized business customer about their confidence in your bank.
- Share insights from regulators, affiliate associations, and other experts noting the uniqueness of Silicon Valley Bank’s situation.
- Offer personal assistance for anyone with specific questions on concerns. Encourage your bank’s leadership to convey that they are available to community members as needed.
What’s Next
This incredibly unique series of events highlights–perhaps more poignantly than ever–the importance of showing and conveying your community values at every turn. It’s not enough to say your bank is great–or even for major media outlets to deem it reputable. Being a top bank doesn’t actually forge and build trust.
What community banks know is relationships. The ongoing work of marketing and PR is about how you message the relationships you have with your community and the individuals and businesses within it. Those relationships are unique and powerful, and they’re meaningful to people–especially in times of crisis.
Please know that, as always, we at Social Assurance are here to help and my personal door is always open. I appreciate the opportunity to serve community-focused financial institutions and am humbled by the important work you do for your communities every day.
Sincerely,
Ben Pankonin
