Another bank just bit the dust.
First Republic was closed by the FDIC and bought by JPMorgan, marking the second-biggest US bank failure on record. Now, three out of the four biggest bank blowups have happened in the past two months.
This wasn’t a complete surprise, as First Republic has been on the ropes for weeks. This particular string of bank scares isn’t a condemnation of the economy — more a reflection of changing rates and consumer behavior.
However, it’s another reminder that the ground may be shifting underneath us.
Balance sheet issues have forced smaller banks to pull back on lending, and small business owners are reporting that loans are harder to get now than at any time over the past 10 years. People are still pulling their money from their savings and checking accounts, which could pressure banks to come up with more funding.
The banking system touches many areas of our lives, from our own money to the money of the companies that employ us, and the economic stability of those companies. Small problems can become big problems in a flash. It’s the downside of a centralized financial system.
This may not be a crisis just yet, but one could unfold if the dominoes keep falling.
So what does this mean for you?
Take some time to review your portfolio. Double-check your portfolio’s sectors and allocations. Make a plan for what you’d do if stock or crypto prices fall from here, because they’re near year-to-date highs.
Focus on quality companies and projects when looking for new investments. This news could put smaller, more speculative firms at risk.
Think about how this changes the banking sector and the financial system as a whole. More regulation could mean banks look like a public utility — higher compliance costs, lower valuations. Financial system cracks could also boost the argument for decentralized finance and crypto.
*Data sourced through Bloomberg. Can be made available upon request.