Unfortunately, there’s no easy way for consumers to discern if a bank is potentially in trouble given its investments mix, Stephens confirmed. “It’s quite difficult to predict, and as we’ve seen with Silicone Valley it happens very, very quickly. Rather than worrying about that, as long as you’re protected you’ve got the government guarantee. I wouldn’t lose too much sleep over trying to understand the financial clarity of a bank. I think in terms of banking, we don’t want to go the path of too big to fail, because we know no one is too big to fail.”
Which banks are collapsing in 2023?
Having said that, Stephens did note having read of some 186 banks that may be overly exposed to devaluing government bonds. Indeed, the Social Science Research Network issued the report, suggesting a high number of banks could be at risk of collapsing in a similar fashion as Silicon Valley Bank. As its premise, the report found that the banks on the list could face significant trouble should half of their depositors yank their funds. What’s worse, researchers conclude the FDIC may not be able to fully cover affected consumers should such a mass withdrawal of deposits occur.
“My personal belief is if we saw a mass collapse of banks, the whole financial system would be at risk so I don’t believe that would happen,” Stephens said. “I think just like we saw in the GFC and more recently during COVID, the government will print as much money they need to print in order to shore up the system.”
But that creates problems of its own, he noted: “And that actually creates a bigger and more dangerous problem because every time they print money, it devalues all the money we already have,” he said. “And that’s another reason why you don’t want to be totally invested in cash.”
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