Regional banks and regulators try to soothe depositors’ fears

But fear persists.

More than 90 clients of Kruze Consulting, an accounting firm that specializes in startups, have changed banks in the last few weeks — and half went to JPMorgan Chase, said Scott Orn, the firm’s chief operating officer.

“As things started getting scarier and the regional banks’ stock prices started getting hit, it became clear that the only place you’re totally safe is the too-big-to-fail banks,” Orn said. “It’s the prisoner’s dilemma everyone has been talking about.”

That worry is at odds with the optimistic messages from regulators and bankers that the crisis may be abating, and underscores the uncertainty that continues to stress the banking system.

Eric Peters, the founder of One River Asset Management in Greenwich, Connecticut, wrote on Monday of his decision to shift some of his investment advisory firm’s cash from a bank in Santa Barbara, California, to a too-big-to-fail giant.

“We’re exposed to the credit risk of our commercial bank, but we’re not being compensated in any way for it,” Peters said in an interview. “As a rule, I don’t like to take a lot of risk and not get paid for it.”

None of the Big Four banks — Bank of America, Citibank, JPMorgan and Wells Fargo — have commented publicly on how much new cash has flowed into their coffers, but bank officials familiar with their operations acknowledged that they had gained some of the deposits leaving Silicon Valley Bank and other regional banks.

Those shifts are hard to track in real time; banks disclose their deposits and assets in quarterly regulatory filings. Some, though, have clearly suffered a hemorrhage: In a Monday note, Morgan Stanley analysts estimated that First Republic, a San Francisco lender, lost $86 billion in deposits, or about 72% of its total uninsured deposits, between Silicon Valley Bank’s collapse and last Wednesday. (Late last week, 11 of the country’s biggest banks said they would lend First Republic $30 billion.)

Executives of small and regional banks — typically considered those with up to $50 billion or so in assets — appeared to be divided on the toll the crisis has taken on their finances.

In Washington on Tuesday, those at a previously scheduled meeting of the largest bank lobbying group, the American Bankers Association, sought to show that the panic was subsiding.

“Things are calming down in the market,” said A. Scott Anderson, the chief executive of the Utah-based Zions Bank, which has $90 billion in assets.

Anderson and three chief executives of smaller banks, who appeared together on a panel in a session called “The View From Main Street,” each said they were not seeing deposits being pulled from their banks.

But one member of the audience — the chief executive of a bank with around $60 billion in assets — described some outflows of deposits, largely pulled by nonprofit organizations and businesses too small to have a full-time chief financial officer.

The person, who did not want to be identified because naming the bank risked causing more withdrawals, helped draft a letter that Brent Tjarks, a lobbyist for mid-size banks, sent to regulators on Friday, seeking unlimited deposit insurance for all banks.

The person said the main goal of the letter was to level the playing field. The “too big to fail” label had suddenly made the largest banks appealing destinations for smaller companies’ funds, while some depositors now view mid-size banks as too risky to trust, the person said.

Last week, Mayopoulos sent Silicon Valley Bank clients a note: “If you, your portfolio companies or your firm moved funds within the past week, please consider moving some of them back as part of a secure deposit diversification strategy.” He added that the bank was “actively opening new accounts of all sizes and making new loans.”

Other bankers, however, said they were not seeing widespread anxiety from customers.

Camden Fine, a former president of the Independent Community Bankers of America, said that after Silicon Valley Bank failed, he had begun calling bankers he knew to check in.

“I probably spoke to at least three dozen community bank CEOs from all parts of the country, probably banks ranging from $500 million in assets all the way up to $10 billion in assets,” Fine said. “Without exception, every single one of them said: ‘We are seeing deposit inflows to our banks. We’re actually gaining deposits.’ They were baffled by all this talk about deposits are fleeing smaller and regional banks and going to the megabanks.”

To keep cash at risk of leaving, some bankers are steering clients to products that reduce their unprotected deposits. One popular option is often referred to as an “insured cash sweep” — a service that breaks large deposits up into chunks and farms them out to multiple banks.

Nearly 3,000 financial institutions, mostly community and regional banks, participate in a network operated by IntraFi Network, a company in Arlington, Virginia. Founded 20 years ago, IntraFi runs a service that lets banks make “reciprocal deposit” swaps. A customer can, for example, deposit $10 million in a local bank, which can then use IntraFi’s network to parcel the deposit out to other institutions in amounts below $250,000. That ensures that the money is fully covered by the Federal Deposit Insurance Corporation’s guarantee.