COSTA MESA, Calif.–Banking customers are increasingly concerned over the stability of the U.S. banking system, according to a new survey conducted by J.D. Power.
The new J.D. Power poll found nearly one-third (29%) of banking customers say they are “very concerned” with the stability of the banking system. Among those who are aware of the recent Silicon Valley Bank and Signature Bank failures, that number rises to 34%, J.D. Power reported.
“Overall, customers with higher total deposits and higher financial health scores show more concern about the stability of their banks and the safety of their deposits,” the company stated in releasing its findings.
According to J.D. Power, the high-profile bank failures have also stoked misconceptions among retail bank customers about bank failure risk and deposit protection.
“Notably, consumers banking with smaller, regional and mid-sized banks show consistently lower levels of concern about bank stability than those banking with larger, national institutions,” J.D. Power said.
Overall Financial Health Holds Steady
Meanwhile, for the third straight month, J.D. Power said there has been no noteworthy change in overall financial health. More than one-third (35%) of respondents are financially healthy, while 41% are vulnerable.
The overall level of inflation recognition fell slightly to 63%, J.D. Power said, adding that the percentage of customers that said the price of goods is increasing faster than their income also fell slightly for most customer segment groups but was largely in line with the previous months as well.
Unpacking Customer Fears
J.D. Power said the failures of Silicon Valley Bank and Signature Bank have given some banking customers a case of 2008 “déjà vu.”
Among its findings:
- Overall, 29% of banking customers say they are “very concerned” about the stability of the U.S. banking system. That number increases to 34% among customers who are aware of the Silicon Valley Bank and Signature Bank failures. Just over half (52%) of banking customers are aware of any bank being forced to close.
- Banking customers who are more likely to be aware of the collapse are financially healthy, more than 40 years old, and have more than $10,000 in deposits.
- Interestingly, when asked about their specific bank, the level of customer concern falls from 29% to 19%, indicating that most customers view bank stability as someone else’s problem.
Misconceptions
J.D. Power said the survey also uncovered some widespread misconceptions among customers about which banks have the largest risk exposures. Among the findings, according to the company, customers of large, national banks express the second-highest level of concern (32%), even though those banks that are actually more protected. Conversely, local bank customers (23%), mid-sized bank customers (21%) and credit union members (19%) had the three lowest levels of concern, while those institutions have the bigger risk exposure.
The Fate of Deposits
As customers contend with this new anxiety, will it lead to a mass exodus of deposits? asked J.D. Power, before answering, “Not necessarily.”
“Overall, 17% of bank customers say they are very likely to switch banks in light of the recent bank failures,” J.D. Power said. “When asked about deposits, that number increases slightly to 23%, suggesting that customers are more likely to explore relationships with secondary banks than to completely exit their primary institutions.”
The full J.D. Power analysis can be found here.
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