‘It’s hard for banks to be taken seriously’: The fundamentals of crisis interaction

Seamen’s Bank’s branch situated in Wellfleet, Massachusetts. President and CEO Lori Meads chose to err on the side of openness when it pertained to interacting with clients throughout the current banking crisis.

The news broke on a Sunday in March — regulators had actually taken control of Signature Bank. 

Not just was it the 2nd failure in simply a couple of days — Silicon Valley Bank had actually satisfied the exact same fate on that Friday — however the 3rd biggest in U.S. history. (Silicon Valley Bank was the 2nd.) 

There was wall-to-wall news protection about these occasions. Speculation about the future of other organizations and the health of the market general spread throughout social networks in a manner that banks had not been required to face throughout previous crises. Twitter was still in its infancy when the 2008 monetary crisis struck, while other platforms, like TikTok and Instagram, weren’t even around yet.

“You could see a storyline develop on Twitter then a few hours later, you could see it on TV,” stated Chris Donahoe, co-head of U.S. operations at Edelman Smithfield, an interactions company. “You could see in real-time how hot takes and lines of inquiry would develop on social media and evolve across the media spectrum.” 

That suggested bank executives needed to rapidly choose whether to provide a public declaration assuring clients of the security and strength of their own organizations. But stating something would run the risk of placing the bank’s name into a discussion about other banks’ failures that had absolutely nothing to do with the strength of their organization. Staying quiet was likewise a dangerous proposal as clients or others might make inaccurate presumptions about the bank. 

Lori Meads, president and CEO of Seamen’s Bank in Provincetown, Massachusetts, chose to err on the side of openness. The bank prepared a declaration that had a positive and encouraging tone and consisted of truths, such as Seamen’s having a strong liquidity position. The info was sent by mail and emailed to clients and readily available in the bank’s branches. 

“I didn’t want to come across as alarmist,” she stated. “Silence is the worst because then people will assume and make up their own judgments of what is going on.” 

During a time of unpredictability, it is necessary that executives are transparent with crucial stakeholders, consisting of team member, investors and clients, about the state of business. But at the exact same time, they should beware not to unintentionally produce a panic, professionals stated. 

“The correct answer is not always obvious,” Donahoe stated. “You might be working with partial information. Banks are making the best decision in a really challenging environment.” 

Thinking through the crisis

The very first concern CEOs need to ask themselves is whether a public business interaction would be more helpful than destructive, stated Greyson Tuck, president of Gerrish Smith Tuck, a law office in Memphis, Tennessee. Determining that is not constantly simple and will mainly depend upon the bank’s particular position. 

Management groups need to have finished a few of this work prior to a crisis emerges by going through different situations to identify what actions they may take, and what, if anything, would require to be stated. Most banks have actually done a great task of being gotten ready for problems that have actually ended up being more regular, such as a cyberattack, however numerous should do more to be gotten ready for other kinds of issues such as a liquidity occasion, stated George Morvis, president and CEO of Financial Shares Corp., a monetary services seeking advice from company based in Hinsdale, Illinois.

“It’s the stuff you haven’t been through recently that you need to think about,” Morvis included. “You need to be very detailed in the scenario planning. It’s a complex area, but I don’t believe a lot of banks are paying enough attention until it’s too late.” 

Declining to launch a public declaration does not suggest the management group can unwind, lawyer Tuck included. They require to ensure that frontline workers understand how to deal with any concerns from clients who might call or check out a branch. 

“If a customer comes into a branch and says, ‘I saw this bank out in California failed, do I need to be worried about my deposits,’ the worst answer would be, ‘I don’t know what you are talking about,'” Tuck stated. “Every bank needs to provide some level of education to employees so that they are able to appropriately react to any comments.” 

At the $493 million-asset Seamen’s Bank, Meads took numerous actions to make sure that team member comprehended what had actually taken place at Signature Bank and Silicon Valley Bank. She sent an e-mail to all employees, discussing the occasions that had actually unfolded in the previous couple of days. She likewise participated in a branch supervisor conference and one for client service agents and examined crucial pieces of info, such as the bank’s capital ratios being greater than regulative requirements and its financial investment technique. 

The bank likewise took messaging it had actually composed for consumer interactions and changed it into a frequently-asked-questions guide for workers to utilize to assist clients. Creating the frequently asked question guaranteed that the messaging corresponded throughout the bank. 

In completion, Seamen’s Bank fielded extremely couple of issues from clients, though one gentleman did drop in a branch to talk about the chaos. Employees wound up printing out some info, consisting of information about deposit insurance coverage, for him to take house because he didn’t have a computer system, Meads stated.

“Some employees didn’t understand how a bank could fail,” Meads included. “If employees are feeling confident in what they are saying to customers and understand it, it just further promotes reassurance to the public.” 

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What requires to be stated

If a management group chooses that something requires to be openly launched, there are a couple of points they should think about. The very first factor to consider must be what they will send to clients, according to Tuck.

During the unpredictability in March, numerous neighborhood bank and cooperative credit union CEOs made the effort to inform customers on how their service design was various from that of Signature and Silicon Valley. That was a great technique, professionals stated. 

However, Donahue stated that banks need to go even further. “The impulse to say ‘We are different is correct,'” he stated. “But banks should go all in on that impulse and do a full-court education for members of the media, investors and depositors to help them understand what is different and what the management team is doing. 

“It is inadequate to simply put out a news release,” he added. “You need to roll up your sleeves and assist individuals comprehend at a much deeper level what is unique about your organization.” 

Ciaran McMullan, who served as president and CEO of Suncrest Bank before it was sold to Citizens Business Bank last year and now advises banks and fintechs, said that any and all messages need to be clear and concise. CEOs should emphasize how their banks serve a range of industries and have a diverse customer base, he said. 

Those types of messages could help assuage customers’ fears since the regional banks that failed recently were concentrated on certain sectors. Signature had been focused on the cryptocurrency sector in recent years while Silicon Valley Bank was well-known for serving the technology industry. 

“I believe this mini-crisis really assists to display the strength of neighborhood banks and mid-sized banks,” McMullan said. “The banking system is constructed completely on trust.” 

Experts also said it’s essential that messages don’t raise new questions or concerns, which was a problem for Silicon Valley Bank. For instance, on March 8, the bank released a statement saying that it had sold $21 billion of its securities portfolio at a $1.8 billion loss. Management also said the bank would raise $1.25 billion through a stock sale. However, banking experts criticized the press release for not providing enough context about its plans. 

“For a number of the bank’s clients, it came out of the blue and didn’t offer any context, which raised more brand-new concerns while offering no responses,” Donahoe said. “Any time you’re producing immediate concerns from stakeholders and those concerns are met an info vacuum, you remain in a susceptible position.” 

Secondly, banks need to consider who they will send the information to, Tuck said. Does the bank reach out to every customer in some way? Does the institution target only customers with deposits over the insured limit?

Those decisions will influence the third item that banks must consider — how to disseminate the information. For banks with a strong relationship-based model, having bankers reach out to their individual clients may make the most sense, McMullan said. Otherwise, something like a press release or a letter from the CEO could work, he added. 

Contrary to popular belief, a significant number of customers do take the time to read communications institutions send out. More than 60% of customers said they read through bank communications, according to a 2021 survey from Pinkston, a strategic communications firm based in Falls Church, Virginia. Less than 12% said they normally don’t. 

That same survey found that about 60% of customers said they would pay attention to communication sent out via email while roughly 40% said the same for a text or phone call. About a third said they would pay attention to information provided in person. (Respondents were allowed to select up to three choices.) 

Oakworth Capital Scott Reed April 12, 2023
“The subtle message is that the team at Oakworth is attuned to what is happening in the world, how it impacts the bank and by extension customers’ businesses,” stated Scott Reed, president and CEO of Oakworth.

Bob Farley

Consistent open dialogue

Perhaps one of the biggest struggles during the crisis in March was for executives’ assurances about their bank’s stability to not sound disingenuous. A few days before its failure, Signature released a statement that outlined its strengths, including “a varied deposit mix, with more than 80% of deposits originating from middle market services” and “a high level of capital as evidenced by a typical equity tier 1 risk-based capital ratio of 10.42%.” Just days later, the institution was taken over by regulators. 

Consumers took note of this, and it made them suspicious of similar statements from other banks. 

“It’s hard for banks to be taken seriously when they all [say] the exact same thing prior to insolvency,” one person wrote on Twitter after First Republic Bank in San Francisco released its own statement about its solvency.

The $212.6 billion-asset First Republic declined to comment for this story. It was subsequently taken over by regulators in early May.

“It’s the proverbial college athletic director,” Tuck said. “The college states, ‘We stand entirely behind our coach despite the fact that we have actually lost all our 9 last video games.’ Any time you see that, you understand that the coach is fired. This is sort of the exact same thing.”

Listening to all of the questions customers and employees have is an important way to counteract this. Ensuring all communication is fact-based and transparent is another way to prevent doubts, Donahoe added. 

Oakworth Capital Bank in Birmingham, Alabama, is consistently communicating with customers through thought leadership pieces that are posted to its website. John Norris, who is responsible for Oakworth’s investment management services, writes regular blog posts on a variety of topics, including macroeconomic events. The bank also hosts a podcast. Oakworth’s customer base is largely businesses whose owners are deeply interested in what’s happening with the broader economy. They have come to appreciate the bank’s efforts to keep them apprised of macroeconomic issues, said Scott Reed, CEO and chairman of Oakworth. 

The $1.3 billion-asset bank opened in March 2008 as a financial crisis was gripping the country. As a result, management learned the importance of over communicating with customers, Reed said. Oakworth approached the current turmoil in much the same way, with Norris addressing Silicon Valley and Signature’s failures in his blog. The bank also provided training and information to employees so they could meaningfully discuss the events with any concerned customers. 

Since the bank is consistently discussing macroeconomic issues with customers, talking about the recently failed regional banks seemed like a natural fit, Reed added. He believes that consistency ensures that customers can trust the information that Oakworth is putting out.

“We sort of laugh that when times are actually excellent, it sounds uninteresting to discuss security and strength,” Reed added. “Internally, we explain this as it does not matter till it matters.

“The subtle message is that the team at Oakworth is attuned to what is happening in the world, how it impacts the bank and by extension customers’ businesses,” Reed stated about how its clients see their believed management. “We have that ongoing communication with them.”


A news media journalist always on the go, I've been published in major publications including VICE, The Atlantic, and TIME.

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