Mar 22, 2023
Did you hear of the collapse of the Signature Bank? The collapse was caused by customers withdrawing over $10 Billion in deposits. failure of the Signature Bank was triggered by the failure of Silicon Valley Bank, aka SBV which had announced a need to raise some money for its balance sheet. As investors, should we get worried?
In this episode, Tyler Knott joins me on the podcast to enlighten us on what’s happening in our local banking and how it relates to real estate. Tyler is the chairman and CEO of Bank 21. He helps us understand how bank failures happen, the different types of bank failures, how they relate to real estate, and how banks can safeguard themselves from failure.
Listen in and learn.
Key Talking Points of the Episode:
00:19 What is bank failure, and what are the different types?
02:49 Importance of short-term bonds
07:55 The power of the Federal Deposits Insurance Corporation (FDIC)
12:47 Understanding zero-rated loans
13:33 What percentage of the bank’s deposits come from wealthy depositors?
21:52 The difference between liquidity failure and asset failure
Quotes:
“On a balance sheet, a bank balance sheet depositors’ money is a bank’s liabilities, and assets are bonds or loans.”
“Fed funds is going to earn a lot less than a longer-term bond. But you’ve got a lot of liquidity risk.”
“A bank’s reputation is key, in any industry, but the reputation for proper management is 100% key. Proper management means diversification.”
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