MIDLAND, Texas — Stories of banks going under tend to make people nervous and begin to wonder if the same can happen to their bank.
But what even causes banks to fail?
“One of these banks failed because, basically, a combination of being over-leveraged on treasury bonds that went the wrong direction, and then having a social media-generated run on the bank, which wasn’t necessary. And the other was because they bet wrong on a cryptocurrency deal,” said Dr. Ray Perryman, President of the Perryman Group.
According to Dr. Steve Beach, Dean of the College of Business at the University of Texas Permian Basin, it’s when banks start getting overly ambitious about new ventures or taking too many risks that people should feel concerned.
“I think banking should be a lot like accounting, right? When they start talking about being innovative, and maybe taking on risks, that’s when you need to start getting a little bit nervous about it,” said Beach.
But Perryman said that banks over here in West Texas don't take as many risks as banks like Silicon Valley Bank and Signature Bank when it comes to loans and investments.
Meaning, it seems West Texans don't have anything to worry about right now.
“I don't think you're gonna find a bank in west Texas that's investing in cryptocurrency or start up tech companies," said Perryman. "I don't think you're going to see anything like that in West Texas. And on the whole, I think the banks in West Texas are quite well capitalized and quite well run.”
Perryman said if you are concerned, or at least curious, about how your bank is doing, you can always look at their financial statements and ask them any questions that you have.