- At this time, the abbreviation 'NC' stands for 'no crisis.'” - State Treasurer Dale Folwell
The collapse of two large Silicon Valley California banks in recent days has officials trying to calm investors and prevent a contagious fear of bank collapse that might trigger massive withdrawals.
State Treasurer Dale Folwell chairs North Carolina’s State Banking Commission and says he and N.C. Commissioner of Banks Katherine Bosken have been closely watching the situation. Folwell says he feels confident.
“The banks we regulate in North Carolina do not have the same number of unsecured deposits and are more diversified than those troubled banks,” said Folwell in a statement issued Monday afternoon. “At this time, the abbreviation ‘NC’ stands for ‘no crisis.’”
The North Carolina Banking Commission regulates 37 regional banks. None are among a list of the top five banks with the most uninsured deposits.
Silicon Valley Bank closed on Friday after a run of withdrawals triggered the second-largest bank collapse in American history and the largest since 2008. On Sunday, regulators took control of New York’s Signature Bank and then San Francisco’s First Republic Bank. First Republic was listed as having the highest percentage of uninsured deposits at 68% of its total.
SVB was an integral part of the financial fabric in the tech startup community in northern California. Its closure sent shockwaves through the industry and businesses tried to figure out how to make payroll. OpenAI CEO Sam Altman was among some tech business leaders who started floating loans to small businesses to help them get through the crisis.
In an effort to head off panic, federal regulators made a joint announcement Sunday that all SVB deposits would be protected, even though by law the Federal Deposit Insurance Fund would normally only protect deposits up to $250,000.
“The special-case bailout to SVB creates incentives for risky behavior. Broader changes could be made at the FDIC to avoid what looks like political favoritism,” said Paige Terryberry, senior analyst for fiscal policy at the John Locke Foundation.
Federal officials tried to assure the public that taxpayers would not bear the increased cost.
“Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law,” the statement from the U.S. Treasury Department, Federal Reserve, and FDIC read. “Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.”
Congressman Jeff Jackson, D-14th District, posted a video at 2 a.m. Monday to explain the crisis.
Startups are a critical part of North Carolina’s economy as well. Business creation climbed in 2022 with 171,400 new businesses created, making it the state’s second-best year on record, just under 2021’s record of 178,300.