Introducer: A-B-A President, and C-E-O, Rob Nichols.
(upbeat music)
-: Good morning everyone,
and welcome to the 2023 A-B-A Washington Summit.
I am incredibly pleased and proud
to see such a fantastic turnout,
both at yesterday's forums for mutual bankers,
emerging leaders,
women and allies,
and at this morning's general session.
This is a critical time for our industry
and our nation's economy,
and against that backdrop,
I am grateful to have the opportunity
to address each of you this morning.
In all, we have more than 1,100 bank leaders
attending this summit in person,
with several hundred more watching virtually.
We also have regulators,
lawmakers,
administration officials,
and members of the media,
participating in this event.
We're pleased that they will have the chance to hear more
about the strength and resilience of our industry,
even as some banks have found themselves under stress
in recent days.
Up to about a week ago,
I was planning to give a very different set of remarks
than the ones I'll share with you today.
As this is our annual advocacy gathering,
I had a long list of important priorities to discuss,
and a number of points I was eager to raise
with the top policy makers on our program
about America's banks,
and the policy environment in which they operate.
As I prepared my original remarks for today,
we had just received confirmation,
by the way of the F-D-I-C's
latest quarterly assessment of bank health,
of what everyone in this room knows.
The overall banking industry
remains strong,
resilient,
well capitalized,
liquid,
and serves customers and communities extremely well.
Those facts, by the way, remain true.
But the recent failures of Silicon Valley Bank,
and Signature Bank,
have overtaken all other policy conversations.
Acknowledging that,
I'd like to spend my time discussing what's happened,
where things stand as of today,
and how we move forward together.
The failure of any bank
is a significant event that no one should take lightly.
A-B-A certainly doesn't.
The events of the last several days have shown
that while our industry of more than 4,700 banks is strong,
individual institutions can face serious challenges,
indeed, existential challenges.
As we reflect on the first bank failures
in almost three years,
we must do so with humility,
and with a willingness to learn from them.
At the same time,
we must make clear
that banks across this country
are not facing the same issues.
There are a lot of voices out there right now
offering perspectives,
some helpful, some less so,
on what happened at these banks, why,
and whether it could have been prevented.
While we're still learning the exact reasons
behind these bank failures,
and while things are still moving very fast,
let's examine what we do know as of right now.
11 days ago, Friday, March 10th,
we all watched as Silicon Valley Bank was closed
by the California state authorities,
and placed under F-D-I-C control.
While two government led reviews are just getting started,
there has already been a lot of commentary and opining
on the exact nexus of management failures,
supervisory missteps,
and operational issues,
that led to the sudden acute liquidity crunch S-V-B faced.
What we do know,
is that questions about the bank's health
were amplified and exacerbated
by social media chatter,
that began in the run-up to that Friday's events,
with once loyal bank customers,
and outside commentators,
urging depositors to take their money out of the bank.
This effectively created the bank run that we witnessed.
Government agencies stepped in on Friday to close the bank,
but, unfortunately, that action alone did not stem the tide.
By Sunday morning,
it became clear that the steps taken by regulators
were insufficient,
and that more needed to be done.
The environment of uncertainty
also contributed to the closure of Signature Bank
on the other side of the country in New York,
which had its own unique business model and challenges.
During this time,
I was in touch with regulators
at the highest levels within the agencies,
and I shared what I knew about the situation,
and urged them to do what they could do
to boost confidence in the banking system.
Those lines of communication were strong,
and I want to thank them
for their ongoing engagement with A-B-A.
The dilemma they faced was not an easy one.
Should they allow markets to open Monday morning
under the specter of what might have been
a widening bank run,
fueled by social media rumors
about the safety of the banking system?
Or should they step in, as in fact they did,
to protect all deposits at the two banks,
including those
above the $250,000 cap for F-D-I-C insurance,
while also providing additional liquidity
to banks worried about ripple effects,
decisions they knew would be questioned
both in Washington,
and around the country.
I can tell you from my many conversations over that weekend,
that regulators understood this dilemma clearly
as they deliberated under significant time pressure.
There are, obviously,
differing views about the decisions they made,
but they took the actions they did
to prevent a bad situation from spreading.
They acted to address
this idiosyncratic liquidity disruption at these banks,
and restore confidence in the system.
These were hard decisions,
and we appreciate their service to our nation.
I use the term, idiosyncratic, very intentionally,
because when we look at the factors
that precipitated these bank failures,
it's important to understand,
that these banks, and their business models,
were not typical of the thousands of other banks
that operate within this country.
There was a particular, and unusual,
combination of factors at play
in both of these failures
related to their portfolios,
customer concentration,
and the risk management
in a rising rate environment.
I want to state emphatically,
that regardless of what Americans might be hearing,
or reading on the internet,
they can be confident
in the overall American banking system.
(audience clapping) Thank you.
President Biden, and hosts of others,
communicated this message clearly
in the immediate aftermath of the two bank failures,
and it's one we agree with strongly.
The banking system is healthy,
with robust capital and liquidity levels,
and as a result of the actions taken by the Federal Reserve,
banks now have an additional tool in their toolbox
to help manage liquidity,
through the Bank Term Funding program.
The Fed has stressed that they support banks
making use of this program,
and that it should bolster confidence in the banking system.
In fact, we're seeing positive signs
that the government's actions
are helping ease some of the stress on our industry.
In particular,
funding markets are functioning properly.
Fortunately, we're also seeing encouraging signs
that Americans have maintained their confidence
in the nation's banks.
In the days just after the failures
of S-V-B and Signature,
Morning Consult found that a strong majority,
7 in 10 consumers,
said they trust banks to do what is right,
and about 8 in 10
have confidence that their money is secure at their bank.
All in all, these are solid numbers,
and they speak to the underlying strength of our industry,
an industry that is broad,
diverse,
and resilient,
and well positioned to serve the needs of this great nation.
So what can we expect to see in the coming days?
I think I can say with confidence,
that this episode,
and the factors that led to this period of stress,
will be closely examined for some time.
Members of the media,
some of whom I'm sure are in this room,
or watching on the livestream,
have been busy writing the blow-by-blow stories
on Silicon Valley Bank's final days.
Federal Reserve officials
are going to review what happened and why,
as they should.
We hope that as part of the review,
the Fed examines, among other things,
the speed at which longtime customers
pulled their deposits out,
and the significant role social media might have played
in encouraging that behavior.
We see that the Justice Department,
and the S-C-C,
may be looking into some of those issues, as well,
which we welcome.
And the key leaders on Capitol Hill,
House Financial Services Committee Chairman McHenry,
Senate Banking Committee Chairman Sherrod Brown,
are already planning a series of hearings
to investigate these bank failures,
and the factors behind them.
We will hear from both lawmakers tomorrow,
as well as the ranking members on their committees,
Congresswoman Maxine Waters,
and Senator Tim Scott.
Before these hearings even take place,
some in Congress
have called for repealing bipartisan 2010 legislation
that made improvements to bank rules.
But as experts from both sides of the aisle
have already pointed out,
regulatory tailoring legislation
did not lead to these bank failures.
The changes included in that bill
left regulators with ample tools in the toolbox
to oversee these two institutions,
and repealing that law
will not have made a significant difference.
We recognize others may have a different view.
It's a discussion I expect we will have,
but only after we learn more about
exactly what went wrong, and why.
In the meantime,
there have been other proposals,
some aimed at bolstering confidence in the short term,
and some to level the playing field over the long,
to expand deposit insurance
beyond the current $250,000 limit,
or even to make it unlimited.
These, and other ideas,
merit serious discussion,
but we will need to be mindful of the wider implications.
I have been in touch with bank C-E-Os,
and state association leaders, nonstop,
since S-V-B's failure,
and I have heard, and fully appreciate,
the concerns about fairness and stability
that many of you have expressed.
When it feels like forces beyond your control,
like the whims of the Twitterverse,
can be turned against responsible and healthy companies,
damaging share prices and customer trust,
we, understandably, look for solutions.
But I have also heard from bankers,
no less frustrated by current events than their peers,
who have urged caution
in prescribing an immediate policy response,
particularly one that could have unintended consequences,
and raised questions about bank's role
in a free market economy.
As this debate plays out,
we will continue to make clear
that any changes to deposit insurance,
must ensure a level playing field for competition
among banks of all sizes.
(audience clapping) Thank you.
If nothing else,
this episode is educating people
on the deposit insurance fund,
which was created to instill confidence
in the banking system,
respond to bank failures,
and protect customers.
In this instance,
banks across the country
could be asked to foot the bill,
through a possible special assessment,
should the sale of Silicon Valley Bank,
and Signature Bank's assets,
not cover the cost of those banks deposits.
Asking a well-run and healthy community bank in Maine,
or Missouri, or Montana,
to help pay for uninsured deposits
at a tech focused,
and much larger California bank,
seems unfair.
My sincere hope,
is that the regulators will use their existing tools
to resolve S-V-B and Signature
in a way that minimizes cost to the deposit insurance fund.
(audience clapping) Thank you.
As we move on from this moment of challenge,
and sort out what happened,
the message I'd like to send is this,
as an industry, we must remain united.
There are those out there
seeking to use this as an opportunity
to weaken our banking sector,
by enacting policy changes that could harm all banks.
The U-S financial system is the envy of the world,
because it is made up of banks
of all sizes, shapes, and business models.
We serve customers ranging from
the largest multinational corporations,
to families all across America,
from red states to blue states,
who rely on their local bank to achieve their goals.
Our depth and diversity
is one of our most important strengths,
and any policy changes
that limit the ability of one part of our industry
to serve customers, clients, and communities,
will, ultimately, hurt all parts of the industry.
It will be critical in the coming days to stand together,
both in our advocacy,
and in how we talk about the issues and challenges
we face.
And as the trade association,
representing banks of all sizes,
that has always been,
and will continue to be,
a priority of A-B-A.
(audience clapping)
We will continue to bring our perspective to policymakers
on the issues that have surfaced
as a result of these bank failures,
and we will also push
for a host of other important, common sense,
bipartisan policy priorities,
even as these headlines continue.
Things like the ACRE Act,
which would provide greater credit access
to our nation's farmers and ranchers;
the Safe Banking Act,
the bipartisan bill that would enable banks
to serve legitimate cannabis businesses
in states that have voted to legalize;
the New Markets Tax Credit Extension Act,
another bipartisan bill,
which would make that important tax credit permanent,
and encourage economic development in distress communities;
stopping misguided proposals around bank fees,
and interchange,
that could reduce access to credit,
and take away popular reward programs;
promoting financial inclusion
through programs like BankOn;
bolstering cybersecurity
as the cyber threat environment
continues to evolve and expand;
and doing everything we can to combat fraud,
whether it's our award-winning
BanksNeverAskThat anti-phishing campaign,
or our ongoing efforts to reduce check fraud,
which is reemerged as a major issue.
A-B-A will bring all of its expertise and resources to bear,
to ensure that the policy environment
remains hospitable to banks of all sizes,
because our nation's economy works best
when it is underpinned
by a broad diverse financial services sector,
supported by common sense policies,
that foster growth, inclusion,
and prosperity for all Americans.
(audience clapping) -: Thank you.
Our industry may have been challenged,
but America's banks remain resilient and steadfast
in their commitment
to meeting the credit needs
of their customers, clients, and communities.
Throughout the last week,
as some have seemingly tried to stoke fear and panic,
I've seen our extraordinary industry
rise to meet the challenge
of restoring calm,
community by community.
You reached out to your customers.
Some of you even shared your cell phone numbers publicly,
to remind them of why
they've trusted you with their business,
and why a bank failure in a far off place
doesn't change that.
In a country of 4,700 banks,
many Americans know their banker's name,
and in times of stress,
that's an enormous source of strength.
Relationship banking is real,
and all of you see that each and every day.
As we kick off our summit program,
I want to thank all of you for being here,
and for your willingness
to share your perspective with policy makers
you will engage with this week.
People need to know that America's banks are strong,
and as dedicated bank leaders
from across the country,
committed to doing things the right way,
I know you are the right people to deliver that message.
Thank you.
(audience clapping)