TUCSON, Ariz.–The failures of a number of big banks has actually benefitted some institutions—unfortunately, it’s even larger banks, noted Co-op Solutions CEO Todd Clark, before sharing where credit unions can find an opportunity in all of that.
The collapse of Silicon Valley Bank, Silvergate Bank, Signature Bank and most recently First Republic have been getting the headlines, with big banks such as JPMorgan Chase snapping up some of those institutions with help from the government.
It’s all taking place at a time when credit unions are facing many challenges of their own.
“Think how far we’ve come in a few years,” said Clark in remarks to the company’s THINK 23 event. “ You guys were dying, just dying to lend money out. Now it’s the flip side…The big question is how is it going to affect us? I think potentially we could be close to done (with the bank failures). The reality is the vast majority of you don’t look anything like those institutions. Yes, you’re short of liquidity right now. We’re all short of liquidity. It’s causing everyone to step back.”
Things to Think About
With the Fed stepping in and the bank crisis perhaps being averted, Clark advised credit unions to think about:
- It’s a whole new world. “This is not a traditional bank run. Now, it’s I pick up my phone, touch a few buttons and I can move billions out of an institution. It’s a new dynamic few of us are ready for. I think regulatorily we’re going to have to do something about electronic bank runs. What is really concerning is that ability to move money in real time and nothing is going to slow that down. It’s just going to go faster and faster and faster. The good news is that about 1% of your actual depositors have over $250,000 in any given account. You’re nice and stable. Little money moved in and out of credit unions. What was interesting was people 18-23 moved more money than anyone else. We think consumer confidence is fairly stable and is going to remain strong. But there are still headwinds. The great news is potentially inflation could go down, but it really has no other place to go.”
- Consumer Trend Lines are not great. See chart, below.
- Card accounts are on the increase (see chart, below). Clark said Co-op is starting to see delinquencies rise.
- Consumers are pessimistic about their personal financial situation. Asked to rate their current financial situation, 27% of Americans said it’s weak. Asked to project their financial situation six months from now, that number jumps to 67%, said Clark and 59% say they are uncomfortable with their ability to invest in the future.
A Downer But…
“I know this is a downer but what is important to know is what we want to accomplish this week. We need to interact with these members more and more to line us up for when this changes for the better in the future,” said Clark.