Regulators need to decide how to recover the cost of rescuing Silicon Valley Bank and Signature Bank – and community banks across the country are warning they should not be on the hook.
A sign is displayed for Freedom Bank in Columbia Falls, Montana. The community lender was founded over two decades ago and has grown its business by catering to locals. Its CEO, Don Bennett, says they should not be on the hook for recovering the cost of rescuing two failed banks.
It's a business model far different than Silicon Valley Bank's, which grew aggressively by focusing on tech entrepreneurs. Freedom's balance sheet is measured in millions, not billions of dollars.Yet Freedom Bank and other community banks are growing worried they will now have to help pay for the rescue of Silicon Valley, as well as New York-based Signature Bank, after regulators last month took the unprecedented step of backstopping all deposits at both lenders.
Freedom Bank has grown, but its business model hasn't changed much. Bennett says decisions are driven by"common sense." Under the country's current system, banks pay into the FDIC's deposit fund, which is meant to insure all deposits up to $250,000. Sen. Steve Daines, a Republican from Montana — where both Freedom Bank and Three Rivers Bank are located — expressed his concerns at a recent Senate hearing with top regulators including FDIC Chair Martin Gruenberg.
Many small banks have seen customers move money to larger lenders, and they are also bracing for increased regulations on their businesses.
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