Hicks: No major impact in Indiana from bank collapse
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe collapse of Silicon Valley Bank and Signature Bank continues to send shockwaves through the banking industry. But Mike Hicks, director of the Center for Business and Economic Research at Ball State University, says Hoosiers shouldn’t expect to see a big ripple effect in Indiana.
“I think we’re going to see fewer bigger regional banks, but I just don’t see us going to a highly-concentrated, four or five banking national market. I don’t think that’s plausible,” said Hicks.
Hicks talked about the collapse in an interview on Inside INdiana Business with Gerry Dick. He said Silicon Valley Bank and Signature Bank had bad risk management and a very high ratio of uninsured deposits.
“The typical bank in Indiana probably has about a third or fewer of its deposits that are over that $250,000 threshold, which makes them more susceptible to a bank run,” Hicks said. “Most of us aren’t going to worry about having that amount of cash in the bank and a savings account.”
Our partners at the IBJ report the Indiana Public Retirement System, or INPRS, is keeping a close eye on its investment in a debt fund managed SVB Capital, a venture capital firm that is a subsidiary of Silicon Valley Bank’s parent company but separate from the bank.
“INPRS is actively monitoring the situation with Silicon Valley Bank,” INPRS spokesperson Dimitri Kyser told IBJ. “The Fund and Silicon Valley Bank Capital operate as separate legal entities, distinct from Silicon Valley Bank. INPRS’s commitment and current investment are owned by the fund, and as such, are not subject to the resolution process underway for Silicon Valley Bank.”
With Silicon Valley Bank’s heavy presence in the nation’s tech sector, Hicks said there is an increased focus on startups that are being affected by the situation, especially as they need to pay employees and suppliers.
“There’ll be a flight of capital; that money is going to go to other banks,” he said. “If you look here in Indiana, [Muncie-based] First Merchants is up this week, which may suggest that people are saying, ‘That’s a safe place to be [with] good risk management. We’ll move money there.'”
Hicks adds another question will be how banks that are not as familiar with the venture capital world going to acclimate themselves to those needs.
“Maybe we’ll see a sort of geographic de-concentration of the startup environment to spread across the country a little bit better. That would be great for Indiana if there was more capital moving to safer banks, and then the expertise to serve as venture capitals moved away from the coasts.”
Looking more broadly, Hicks said he doesn’t believe the collapse of the banks is part of a larger looming global economic crisis.
“We have a lot of tools to prevent bank runs. [The collapse] may be slowing the economy, but certainly not cataclysmic at this point.”