Why Silence Isn’t Golden on SVB & Signature Bank Failures

When the hits to the banking industry keep coming, reticence just doesn't cut it. Veteran communications specialist Merrie Spaeth says careful outreach to local media and civic groups is important for sending positive messages at such a critical time. She also recommends reassuring consumers and answering their questions via the channels you control, like your website. Two warnings: Tell the absolute truth and don't fall into clickbait traps.

As Ron Weasley said to Harry Potter in the “Chamber of Secrets when the giant spiders were descending, “Can we panic now?” Leaving aside all the external challenges like the war in Ukraine, China’s belligerency, the deeply partisan political divide, Congress’ kabuki theater over the debt limit vote, and more, now we have headlines reminiscent of 2008 about large bank failures.

Just to keep the memories fresh, the big three financial dogs — the Federal Reserve, the Federal Deposit Insurance Corp. and the Treasury Department — are setting up new programs on the fly: welcome to the Bank Term Funding Program. Uninsured depositors will be made whole in the resolutions of California’s Silicon Valley Bank and New York’s Signature Bank. Rumors abound about more to come.

The management of the country’s banks and credit unions should watch Jimmy Stewart’s performance in Frank Capra’s “It’s a Wonderful Life” several times. Not just, as you might expect, to relive the near-run on the fictional “Bailey Brothers Building & Loan” in Bedford Falls, and how George Bailey averted disaster, but to reinforce for ourselves the message of one reviewer, that Bailey’s life reminds us how doing ordinary things can have an extraordinary impact on your community.

Why and How Your Financial Institution Should Comment

The Financial Brand has compiled a detailed day-by-day timeline of how events have been playing out. In less than a week we saw the voluntary liquidation of Silvergate Bank and the failure of Silicon Valley Bank and then Signature Bank. “Bridge banks” have been established in the case of both failures.

The issue for executives of other banks and credit unions is what to do now. Thomas Vartanian, legal expert and author of “200 Years of American Financial Panics,” has said persuasively on this site that the crisis isn’t financial, it’s psychological, noting, “The banking system works on confidence and falls apart on lack of confidence.” Encouragingly, in speaking about the fallout, he predicts, “I think it can be well contained if handled properly.”

“If handled properly.” This is where the nation’s bankers need to step up to the plate. It’s Paris Fashion week for the banking industry. Time to see and be seen. Time to strut the runway of your local Rotary, Chamber, civic club and any other appropriate gathering. The way to maintain confidence in the banking system is to get out into your communities and talk about your institution’s policies and your customers.

Merrie Spaeth quote. The way to maintain confidence in the banking system is to get out into your communities and talk about your institution's policies and your customers.

Vartanian and many others argue that SVB’s big problem was overconcentration in one segment of the market: tech startups and other companies in the tech ecosystem mostly located in Silicon Valley. (I guess that’s why they called it “Silicon Valley Bank.”)

What should the leaders of financial institutions be saying in their local markets?

They should be utilizing these three key networks in their communications strategy:

  • Channels they control, such as their webpages.
  • Local media, by sitting for interviews.
  • Local groups, by reaching out as noted above.

Tell your story: When were you founded? By whom? What were their goals? Talk about your employees. Introduce their areas of expertise.

Talk about your local customers — business like the car dealerships, the restaurants, the doctor’s offices, and individual customers like school teachers, Uber drivers, families buying their dream homes. This is what diversification looks like.

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What Your Financial Institution Should Not Be Saying

Take care when answering the inevitable questions. Examples: Is your bank safe? Could what happened to SVB or Signature Bank happen here?

First, always be truthful. Next, remember that film impresario Samuel Goldwyn said to never make predictions, especially about the future.

The response to the first question above is: “We certainly think so. We’re an established, diversified institution.”

The phrasing is important. The words are all affirmative, and the opinion is backed up with supporting facts.

Cardinal Rule:

Never say 'no comment.' Listeners, especially reporters, interpret that as a confirmation.

Never repeat a negative word and then deny it. It’s easy to respond with words like “crisis,” “panic” or “contagion” when they are in a question asked by a member of the press or the public. But don’t do that, because the listener is prone to overlook the denial and hear the opposite of what the speaker is trying to say.

In communications, we call these “BIMBO” comments. They are named such for a young woman who was caught with a high-profile, married man. She held a press conference and announced, “I am not a BIMBO,” thus making headlines and convincing people of the opposite of what she was trying to say.

Resist the temptation to criticize or blame. You’re there to tell your communities how you value the opportunity to serve them and how seriously you take your responsibilities.

Step up your communication skills. Here are several types of what we call “formula questions,” that is, you can strategically recognize and respond to them by identifying how they are structured:

  • “Can you guarantee this won’t happen here?” Rather than be trapped into a “Yes” (which isn’t true, you can’t guarantee it) or a “No” (which is theoretically true but sounds scary), respond with “That’s the plan.” Then you move to what you can guarantee, which is, as outlined above, a commitment to sound financial practices and a good track record.
  • Another frequent formula question is the “quote” question, where the questioner or reporter quotes a third party, and asks for your response. These questions almost always quote someone predicting doom and gloom. The response is to truthfully indicate “I’ve heard that” or, equally likely, “I haven’t heard that.” Then substitute another positive quote. Go back to Thomas Vartanian, who has been in the media saying, “The banking system has so much capital … that it should be well positioned to weather these kinds of storms.” Add quotes from your own state banking association.

This is also how to handle reporters who are looking for clickbait. Be prepared with several soundbites like the ones above and at least three examples of employees and customers, either corporate or individuals. Run them by your counsel and compliance colleagues — and then stick to them.

Read More: Deposit Competition Is On, But Should CDs Still Be the Go-To?

Execute the Communications Strategy Personally; Your Voice Matters

If we learned anything from past crises, it’s the truth of William Faulkner’s famous quote, “The past isn’t dead. It’s not even past.”

Without reviewing all of the two centuries of banking history in Thomas Vartanian’s book, this is still the time to remember that the country’s banking system truly is the economic lifeblood of our economy and thus our way of life.

However, human nature is also predictable. We inevitably fall back into dealing with day-to-day challenges. Banking surely has plenty of them, from managing cybersecurity to deploying the new digital products that’ll wow customers.

I’ve been urging and preparing bankers to get out into their communities for 35 years, ever since my firm worked with the Texas Bankers Association to change the state’s longstanding laws prohibiting home equity lending. Despite the allure of outsourcing outreach to advertising and marketing — and despite the growth of social media — there is no substitute for deploying bankers into their communities to explain, illustrate and inspire.

People are actually paying attention to banking. Take advantage of it.

About the author:

Before founding Spaeth Communications in 1987, Merrie Spaeth was a producer for ABC’s 20/20 and a speechwriter for William S. Paley, the founder and chairman of CBS. She also served as director of public affairs for the Federal Trade Commission and director of media relations at the White House in the Reagan Administration. Her firm works extensively with banks and credit unions of all sizes as well as with state bankers associations.

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