Insights 3/14/23

Knowing that there’s likely a bit of unease out there as a result of the two recent bank failures, we wanted to send a message out to all of you in an effort to ease any concerns that you may have.  There are several critical distinctions between the banks that RMI utilizes and the two banks that were just put into federal receivership.  Both banks had extremely high growth rates in recent years and their concentrations of large, uninsured deposits from clients in the technology and cryptocurrency industries, respectively, contributed to their overall instability.  Moreover, the banks utilized by RMI have deposits that are held in several million accounts, and these accounts overwhelmingly tend to be smaller in size and operational in nature.  Conversely, the average balance of an account at Silicon Valley Bank (the California bank that failed) was about 22 times larger than the size of the average balance in one of our banks’ account, which made Silicon Valley Bank much more susceptible to the kinds of outflows that they experienced last week.  Similarly, Signature Bank (the New York bank that failed) was also saddled with abnormally high balances and fewer accounts overall.  Highlighting the approach taken by the banks RMI utilizes, an analyst at Bloomberg wrote over the weekend, “In the wake of SVB and Signature’s swift demise, it’s important to view deposit granularity, or having lower balances per deposit, as a sign of more funding stability.”  RMI even doubles up on this approach, having its deposits in numerous banks, thus further ensuring that we (and therefore our clients) are not adversely affected by any one bank’s downfall.  Specifically, RMI maintains accounts at 5 large banks and will continue to closely monitor all of them with regards to any issues reported in the banking market but have confidence that our current platform is a conservative and stable one.

If you have any questions or concerns don’t hesitate to reach out. Thanks again for your ongoing relationship with RMI and allowing us to serve you and your employees.