In response to Silicon Valley scare, Maine bank regulator says sector is 'healthy'
Courtesy /Adobestock.com
The collapse of California's Silicon Valley Bank roiled financial markets on Monday.
As financial markets were rattled Monday by the failure of California's Silicon Valley Bank, Maine's top banking watchdog offered assurances that there's no similar danger here.
"We have a healthy banking sector," Lloyd P. LaFountain III, bank superintendent and administrator of the state's Bureau of Financial Institutions, told Mainebiz by phone on Monday. The Gardiner-based bureau supervises all state-chartered financial institutions including banks, credit unions and non-depository trust companies.
"Our banks and credit unions are conservative by nature," he added, "so I have every confidence in that sector here in Maine."
Asked whether his office had any plans to increase surveillance or introduce stricter reporting requirements, LaFountain noted that Maine's banks and credit unions are already under constant scrutiny. He also said he was not aware of any bank failure in Maine during his 18 years as superintendent.
Silicon Valley Bank, which primarily served technology startups and small businesses on the West Coast, ran out of money Friday when rising interest rates depressed the value of its bond holdings and depleted the cash on hand for withdrawals. It was the country's largest bank failure since 2008.
Over the weekend, the Federal Deposit Insurance Corp. took control of SVB's assets in a move aimed at protecting all depositors and giving them access to their money. Shareholders and certain unsecured debt holders, however, will not be protected.
Maine's publicly traded banks weren't immune to Monday's nationwide sell-off in bank shares. Notable decliners were Northeast Bancorp. (Nasdaq: NBN), which fell 9.9%, and Bar Harbor Bankshares (NYSE: BHB), which lost 6.3% of their value. Bank stocks rebounded on Tuesday.
'Decisive actions'
In a joint statement issued Sunday, U.S. Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell and FDIC Chairman Martin Gruenberg announced "decisive actions" to protect the U.S. economy to strengthen public confidence in the banking system.
Those actions include enabling the FDIC to complete its resolution of SVB in a manner that fully protects all depositors, along with protecting depositors of New York's Signature Bank, which was closed Sunday by its state chartering authority. In both cases, no losses will be borne by taxpayers.
"The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry," according to Sunday's joint statement. "Those reforms, combined with today's actions, demonstrate our commitment to take the necessary steps to ensure that depositors' savings remain safe."
On Monday, U.S. President Joe Biden underscored the need to reduce the risks of future bank failures.
"Americans can rest assured that our banking system is safe. Your deposits are safe," he said. "Let me also assure you: We will not stop at this. We'll do whatever is needed on top of all of this."
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