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BCFSA Comments on Recent Events in the U.S. Banking System
Over the last week, there have been various news reports regarding the health of the U.S. banking system. This included news out of California that the U.S. Regulators have shut down Silicon Valley Bank (“SVB”) due to a bank run. A bank run, also referred to a run on the bank, occurs when many clients lose confidence in the bank and withdraw their money over an abbreviated period. SVB was the 16th largest bank in the United States and was focused on the tech sector. In terms of scale, this was the second largest bank failure in U.S. history.
The impact of the closure of SVB put pressure on bank stocks which resulted in dramatic price reductions for certain banks. While stock prices are not a clear proxy for a bank’s health, falling share prices can negatively impact the confidence that depositors have in a bank and lead to a bank run.
In the wake of this situation, BCFSA is reassuring British Columbians that B.C. credit union remains safe and secure. SVB’s business model, capitalization, and risk exposures are materially different than B.C. credit unions, which are focused on servicing individual depositors through residential mortgages or loans to small businesses with physical assets.
BCFSA regulates credit unions to ensure that they are prepared to address risks in the market. In addition to other measures, authorized B.C. credit unions are expected to maintain capital at a level above the statutory minimum and the internal targets of individual credit unions to provide a buffer against unexpected losses. BCFSA remains confident in the safety and soundness of all B.C. credit unions.