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Two recent bank failures raise concerns, but a local banker and an academic offer reassurance

A skyline view of Rochester
Max Schulte
Downtown Rochester skyline view.
Frank Hamlin III, President & CEO, Canandaigua National Bank & Trust
Canandaigua National Bank & Trust
provided photo
Frank Hamlin III, President & CEO, Canandaigua National Bank & Trust

The recent crisis involving a couple of banks, one on the West Coast and another in New York, has been concerning to some bank customers.

But a local banker and a finance professor say those situations were unusual, and shouldn’t impact the average bank depositor.

The collapse of Silicon Valley Bank and the takeover by New York state of Signature Bank caused confidence issues for some people about banks until the federal government stepped in to guarantee depositors would be made whole.

And it also caused some customers to wonder whether it would be better to move their money out of regional or community banks into very large financial institutions.

But at least for Frank Hamlin III, President and CEO of Canandaigua National Bank and Trust, it truly is an apples and oranges type of situation, noting that his bank has been around since 1887.

“If you have a bank that is known as the startup bank, the tech start-up bank, you have to imagine their asset base, their lending base is far more volatile than a diversified community bank that’s invested across all companies within the community,” said Hamlin.

Hamlin sent a letter out to Canandaigua National customers this week talking about the bank’s diversification and the FDIC insurance that guarantees deposits up to $250,000.

As far as the possibility that some customers of smaller banks may seek to move their money into much larger banks, Hamlin points to the federal bailouts that were needed for large financial institutions in the 2008-2009 financial crisis.

“It’s not hard to remind people in ’08. It wasn’t Canandaigua National, never was Canandaigua National or its brethren or its sisters,” said Hamlin. “So the fact of the matter is, I love it when people say I’m going to run to safety and go to the big banks, yeah, look how that worked out.”

Hamlin also pointed to the general stability of banks and other financial institutions in the Rochester area.

“Rochester New York, it doesn’t boom, it doesn’t bust. We have a very stable environment here. We don’t have huge amounts of venture capital that are financing multiple, multiple startups all over the place,” Hamlin commented.

There is an FDIC (Federal Deposit Insurance Corporation) policy to guarantee $250,000 of a bank depositor’s money.

Alan Moreira, Associate Professor of Finance, Simon Business School, University of Rochester
University of Rochester
Alan Moreira, Associate Professor of Finance, Simon Business School, University of Rochester

But the federal government this week went above that limit for depositors at Silicon Valley bank, and at the University of Rochester’s Simon Business School, associate professor of finance, Alan Moreira, said it would probably be helpful if government officials can offer more consistency in what their policies about guaranteeing deposits will be in the future, for all depositors, not just those for very specific types of banks.

“What they didn’t do, was to announce that that’s the new law of the land for the entire country,” said Moreira.

And Moreira said that even though Silicon Valley Bank involved a specialized type of banking situation, it’s not a bad idea for the average banking customer to spread their deposits out among more than one bank.

“It’s good to have more than one bank account, even if you prefer your local bank, you bank with them, but it’s good to have another bank account that you can move money quickly if you need to,” said Moreira.

Randy Gorbman is WXXI's director of news and public affairs. Randy manages the day-to-day operations of WXXI News on radio, television, and online.