Banks, Banking, And Brigadoon

Jim Blasingame

As you know, the U.S. banking system has been challenged this year. Three large “regional” banks collapsed, and not a few experts have opined that there will be more banking-sector bloodshed going forward.

As you may remember, in our online poll last week (see below) we asked about concerns for your bank and the U.S. banking system with this question: “In light of the 2023 bank failures, have you been concerned about your own bank?” 

And we offered these response options (results): 1) We’ve been concerned because we use a regional or large bank (8%) 2) We haven’t been concerned because we use a community bank (51%) ; 3) We’ve been concerned enough to move some or all of our deposits to a new location (29%); 4) That’s funny. What deposits? We’re a small business (12%). 

The results were not surprising in some ways but were in others. I’m not surprised that our small business respondents trust community banks over large banks by a margin of 51% to 8%. For years, the average in national and our polls has shown small businesses’ trust in community banks ranging between 50% and 60%. Frankly, it should be higher. Large, national banks and most regionals are not friends of small businesses. Without a strong community bank sector, American Main Street operators would not have been possible in the past, and will not be possible going forward.  

But I have to say I’m surprised that 29% of our folks say they’ve taken steps to move deposits in response to the 2023 bank failures and other banking bad press. And it’s troubling because it’s difficult to imagine that some of these deposits weren’t moved from community banks. If so, the question is why? And where did those deposits go?

It’s hard to imagine that money would move closer to the trouble – large and regional banks. It’s likely that the younger folks might actually think that moving bank deposits to a fintech, like PayPal or Fidelity, is safer. It isn’t. Some may not know enough about the strength of their own bank. They should. Or, perhaps they do know how their bank is being run, and the news isn’t good. Alas, it must be said that all community banks aren’t created equal.

But here are possible answers to the “why” question that, if true, is an indictment of those community banks that lost reactionary deposits, and they need to do better – now:

  • They didn’t do a good enough job explaining how customers can allocate their deposit accounts to keep each one under $250,000 (FDIC insured). Bank training officer, call your office.
  • They didn’t do a good enough job of regularly reporting (brand messaging) to their customers when industry regulators recognized them for banking excellence. A one-time Facebook blast won’t cut it. Bank marketing manager, call your office.
  • They didn’t recognize that Main Street and community banks no longer operate in a sleepy, little Brigadoon that can pop up out of the mist every few years and then go back to the way things were. Bank leadership, call your office.

In the age of social media and the ability of bank customers to transfer money instantly, 24/7/365, (Google “FedNow”) a bank “run” – justified or not – could happen in the middle of a Wednesday night, and be over before the bank opens at 9:00 a.m. on Thursday. Speed-of-light digital giveth and it taketh away.

If those pundits who preach more impending banking gloom-and-doom are even slightly correct, the next wave of bad performance, bad news, and jittery depositors will crash closer to the shores of Main Street, where lives small businesses and community banks. Business operators, educate yourself about your banking rights and protections, as well as how your primary bank is being run.

Bankers, an entire generation has been born, and another has come of age since the end of the 20th century. The title of my third book is The Age of the Customer: Prepare for the Moment of Relevance. That “Moment” is created by the effortless and instantaneous pressing of an “Enter” key. And the “relevance?” Well, that’s in the eye of the presser of that key. What have you done for them lately?

Write this on a rock … Brigadoon is a sweet and wondrous place. But we can’t live there.

Jim Blasingame is the author of The 3rd Ingredient, the Journey of Analog Ethics into the World of Digital Fear and Greed.

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