Regional Banks Still Face Roadblocks One Year After SVB Crisis (2024)

One year after the2023 banking crisis, America’s regional lenders continue to struggle.

A report Thursday (March 7) by Reuters examined the hurdles facing these mid-sizedbanks, such as higher deposit costs and shaky office building loans, in the wake of the downfall of three banks, Silicon Valley Bank(SVB) andSignature Banklast March, followed byFirst Republictwo months later.

The collapses highlighted how banks manage risks to liquidity and assets amid an ongoing rate hike campaign by theFederal Reserve, the report said.

“The banking industry needs to make sure it has a strong hold on its access to liquidity, conduct in-depth deposit stress testing, and ensure it can withstand significant stress,”Ryan Nash, banking analyst atGoldman Sachs, told Reuters “This is something that all banks will need to plan for in the world ahead.”

The past few weeks have seen new uneasiness around another regional bank,New York Community Bancorp(NYCB), after that lender reported heavy losses and warned of weakness in its internal controls, the report said.

The announcement came as a surprise, as NYCB had been considered one of the “winners” in last year’s crisis after acquiring Signature Bank, according to the report.

NYCB had itscredit ratingcut to junk last month byMoody’s Investors Service, which warned that the bank was contending with “multifaceted” financial risks and governance challenges, Bloomberg reported.

Late last month, NYCB announced theresignationof CEOThomas Cangemiand saidAlessandro (Sandro) DiNello, the chairman of the bank’s board, would take his place.

DiNello’s tenure was only temporary. The bank received a $1 billionequity investmentWednesday (March 6) and made several leadership changes. This included namingJoseph Otting, former comptroller of the currency, as its new CEO.

This week also saw a report that the Federal Reserve and other U.S. regulators were readying newbanking regulationsin response to last year’s crisis, with rules focusing on liquidity requirements to help prevent bank runs.

Amid the turmoil in the sector, PYMNTS has been monitoring a shift in behavior related to banking, with smaller community banks and credit unions increasingly becoming the place where consumers turn forcredit cards.

The percentage of consumers with a community bank or credit union card as their primary card climbed from 8.3% in 2020 to 13% in 2023, according to PYMNTS Intelligence, while nearly a quarter of consumers said they would likely turn to these financial institutions the next time they applied for a new card.