Features | From Pivot Magazine

The fragility of faith when it comes to money

When banks are in trouble and our finances are threatened, who and what do we believe in?

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Silicon Valley Bank headquarters and branch in Santa Clara, CaliforniaDuring a couple of tough weeks in March 2023, governments stepped in to rescue depositors in the U.S. and force a sale in Switzerland (Shutterstock/ Sundry Photography)

Earlier this year, stories about the global banking system dominated business headlines. Three U.S. bank failures and the forced sale of a historic European bank raised comparisons with the 2008 collapse. And it all happened so fast. During a couple of tough weeks in March, governments stepped in to rescue depositors in the U.S. and force a sale in Switzerland, and what the media seemed initially to anticipate as mass panic rapidly subsided. The headlines dissipated, and the response from global stock markets was marginal.

So, what happened—and what does this mean to us as individual clients of the banking system?

All institutions—financial, governmental, educational—are predicated on our collective faith in their value and stability. When that faith is threatened, institutions crumble. And with the speed of today’s communications, a trickle of mistrust can become a raging river with remarkable speed.

Silicon Valley Bank (SVB) wasn’t bankrupt in the sense that they had no assets; rather, poor decisions to invest deposits in long-term low-interest bonds made clients nervous. Word spread like wildfire among their tech savvy clients, who started to pull their deposits, leaving SVB no liquid assets to distribute. Credit Suisse had been plagued by scandal for some time, but when its largest shareholder announced it would not buy more shares, a run threatened, drawing the immediate intervention of the Swiss government.

For now, these swift interventions seem sufficient. When push comes to shove, governments and government entities have the tools and the will to come swiftly to the rescue, restoring faith along the way. It will, however, come at a cost, which is why it's important that we pay attention to the economy to ensure it continues to work for all of us.


Learn how our personal money stories can drive our financial decisions, and find out whether Canadian banks are as solid as they are said to be.