Local banking leaders say diversification is key to avoiding bank failures
Bankers in Columbus met Friday for a roundtable discussion regarding the banking industry in the city, following the collapse of Silicon Valley Bank in California earlier this month.
Representing a handful of central Ohio's 52 banks as panelists at the event were Francie Henry, regional president of Fifth Third Bank; Ilaria Rawlins, the proposed CEO of Fortuna Bank, a new woman-owned bank that’s expected to be licensed later this year; Jenny Saunders, president of FCBank; and Jennifer Griffith, regional president of First Merchants Bank.
The panelists at the Columbus Metropolitan Club’s event are optimistic that banking in Columbus is diverse enough to avoid a similar bank failure. They had a central message after the run on SVB, which is being called the second-largest bank failure in the United States.
“We don’t want you to worry,” Henry said.
Bank customers tried to pull $42 billion from the bank after word of problems began to spread on social media.
Saunders said part of SVB’s problem lies in the bank’s business model.
“If anybody really paid attention to Silicon Valley Bank, SVB as we all know it, 95 to 98% of their customer base was tech," Saunders said.
Saunders said diversification is key to maintaining healthy banks.
“Then when you have a sector of the economy that may be struggling a bit, like we’ve all seen with tech over the past year, it doesn’t have such a negative impact," she said.
But Griffith said people shouldn't be scared of investing in tech. She said the sector is "really important" to Columbus’ future.
“We need people to be comfortable in tech, and we need not to be concentrated in tech," Griffith said. "So we need to figure out how we make sure we support it, we finance it, we provide access to capital, we help their working capital cycles, we know their payrolls are growing and getting paid for. There is a place for us in that space, just not a concentrated space.”
The banking industry is still feeling the impacts of the COVID-19 pandemic as the Federal Reserve hiked interest rates this week for the ninth time in an effort to fight inflation.
“The world is not the same as it was before and it’s not behaving the way it did before," Saunders said.
The panelists said it's uncertain when rates will stop rising.
Saunders said the Federal Reserve doesn’t have a lot of tools to combat inflation, and on top of that, the economy has been rather unpredictable since the pandemic.
But, she said central Ohio is more insulated because of the area’s growth and development.
“Columbus is in a bit of a bubble. We tend not to have quite the dramatic shifts that other places in the country do, that doesn’t mean that there aren’t people hurting in our community and we need to take care of them, but we are in a bit of a more fortunate position, I believe, than other places in the country," Saunders said.
But in central Ohio, Griffith said she is concerned about the affordable housing crisis.
“When we take a look at the number of businesses that want to be in our backyard, they need high performing employees to have access to safe and affordable housing and that is a gap that we need to close quickly," she said.
But she and the others at the roundtable were optimistic that a mix of cooperation across numerous sectors will close the gaps in housing availability.
Griffith said she was optimistic in the local banking industry’s ability to weather higher rates and a possible recession.
“When we think about the season of correction that we all need to absorb in the coming months, it will not last as long as the expansion that’s on the other side of it. It just absolutely won’t,” Griffith said.