Few Americans have trust in the nation’s banking sector following the recent collapses of Silicon Valley Bank and Signature Bank.
A mere 10% of the population has a “great deal” of confidence in the individuals who lead banks, according to a poll from the Associated Press and the National Opinion Research Center released on Wednesday, while 30% have “hardly any” confidence and 57% have “only some” confidence. The survey, which was conducted between March 16 and March 20, found that trust in financial firms declined from the 22% who had a “great deal” of confidence three years ago.
The sudden collapse of Silicon Valley Bank, which was closed on March 10 by regulators and is now controlled by the Federal Deposit Insurance Corporation, induced a bank run as account holders with funds that surpassed the $250,000 deposit insurance threshold withdrew their balances. Signature Bank, which was closed on March 12, likewise had a large share of account holders with deposits above $250,000.
Americans also expressed a preference for more regulation on the sector: 56% of respondents believe “government regulation of financial institutions is inadequate,” with 63% of Democrats and 51% of Republicans calling for more restrictions.
The White House recently asked lawmakers to introduce regulations that would “hold senior management accountable when their banks fail” or enter into the control of the FDIC and vowed that “the American people and American businesses can have confidence that their bank deposits will be there when they need them.” House Financial Services Committee Chairman Patrick McHenry (R-NC) said that he has “confidence in our financial regulators and the protections already in place to ensure the safety and soundness of our financial system.”
Another survey from CivicScience found that the share of Americans reporting “not very much” trust in banks soared from 34% to 39% in the days after the collapses.
Silicon Valley Bank fulfilled withdrawal requests by selling a long-term bond portfolio that had declined substantially in value amid Federal Reserve actions to hike interest rates. Assets in the overall banking system are now $2 trillion lower than their book value, according to a study from analysts at the National Bureau of Economic Research.
Treasury Secretary Janet Yellen commented on Tuesday that withdrawals from regional banks have stabilized and asserted that the financial system remains sound. “The American economy relies on a healthy banking system that can provide for the credit needs of families and businesses,” she said in remarks to the American Bankers Association. “Let me be clear: the government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors’ savings and the banking system remain safe.”
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Some have expressed concern that the implosion of the two financial institutions would lead to further consolidation in the banking system. New York Community Bancorp acquired the former branches of Signature Bank on Sunday for more than $38 billion and will service the defunct firm’s clients via Flagstar Bank, according to a statement from the FDIC; the government-backed corporation also said there has been “substantial interest from multiple parties” with respect to the sale of Silicon Valley Bank.
The two largest banks in Switzerland, UBS and Credit Suisse, likewise merged this week as the former purchased the latter for more than $3 billion. Credit Suisse, formerly the eighth-largest investment bank in the world, had struggled over the past several years under lackluster risk and compliance management.