Today, Michelle W. Bowman, the Governor and member of the Board of Governors of the Federal Reserve System delivered a speech at the 21st Annual Symposium on Building the Financial System of the 21st Century. He shared his views on the evolving nature of banking, bank culture, and bank runs.
A report published in the speech of Michelle W. Bowman discussed a wide range of topics from rising inflation, to the collapse of three major banks in the United States, and crypto and digital assets-related topics. Additionally, he clarified that currently, the United States financial system seems sound and resilient against any threats.
However, the collapse of three major banks in the United States, the Silicon Valley Bank, the Silvergate Bank, and the Signature Bank has caused widespread chaos in the US. Also, he added that uncertainties like movement in stock price have further raised the risks. “The future and current policy choices made in responding to these failures will have important consequences for the U.S. banking system”, says the Governor.
At the symposium, the focus was mainly on building the financial system of the twenty-first century. In his speech, Michelle W. Bowman provided a detailed overview of the collapse of Silicon Valley Bank. According to him, the failure was ignited by traditional concerns but it was faster than the previous bank’s collapse. The main reason behind the faster collapse was the increased use of modern communication methods like social media which fuelled the collapse. Also, the funding of the SVB mainly relied on large deposits from the technology and healthcare sector and they were almost uninsured (more than 95%). So, the main reason behind the collapse was the speed which was lacking in the previous bank collapses.
The main shift currently we are witnessing in the banking sector is “culture” which is constantly changing the mindset of people. The cultural shift includes whose business models directly involve funders of startups and transformative new technologies like crypto and digital assets. Additionally, it added that innovation has been a long-term priority because it enables them to offer new financial products and remain the most competitive sector. The American economy is dependent on a wide variety of enterprises, which are supported by a wide variety of banks. Also, clarified the role of Regional banks are a vital part of the US financial system, and their removal would be disastrous for businesses and communities all across the country.