ATLANTA – Georgia’s banks are in a strong position in the wake of the failure of two large American banks this month, the deputy commissioner of the state agency that oversees banks said Tuesday.
“The state of banking overall in this country is very strong, and that’s especially the case in the state of Georgia,” Bo Fears of the Georgia Department of Banking and Finance told the state Senate’s banking committee.
The problems that caused the collapse of Signature Bank and Silicon Valley Bank (SVB) do not plague Georgia banks, Fears said, pointing to three major distinctions between the failed banks and Georgia’s banks.
First, SVB and Signature’s business was heavily concentrated in the high-tech industry. The banks were focused on serving fintech (financial technology) companies, venture capitalists who supported fintech, and cryptocurrency companies, Fears said.
“In Georgia, we don’t have that concentration,” he said. “We’re much more diversified. I’m unaware of any Georgia state-chartered bank that even banks a crypto-company.”
Second, 90% or more of SVB and Signature Bank’s deposits were uninsured, Fears said. No Georgia bank comes close to approaching that very high level of uninsured deposits, he said.
Third, like most banks, SVB and Signature were heavily invested in securities.
“When the interest rates were relatively flat, that was fine,” Fears said. “But within the last year, when there have been the interest rate raises, that’s created unrealized losses – so essentially paper losses in the bond portfolio.”
Just before its collapse, SVB liquidated a large portion of its security portfolio and the losses were realized – to the tune of about $1.8 billion. Public notice of those losses helped fuel the run on the bank and its failure soon thereafter.
Most banks have unrealized losses on their securities portfolio, like SVB did, Fears noted. But those losses – unlike in the case of SVB – continue to remain unrealized.
“Our [Georgia] banks have done a very good job of accounting for that interest rate risk by hedges or other mechanisms, so they don’t have that same exposure,” Fears told the committee.
In addition, since the two banks’ collapse, the Federal Reserve has established a program to provide the face value of securities rather than the lower market amount if a bank needs the securities as collateral in order to prevent an SVB-like situation from happening again.
That new program provides further guarantees that other banks do not face the same risks SVB and Signature did, Fears said.
“This is very different than the  recession,” he said. “I’m very confident in the safety and the strength of the banking system in the state of Georgia.”