annual report to announce another record year in losses — $10.3 billion in losses in 2022 compared to $6.9 billion in losses in 2021;10 and, recently, the DOJ revealed charges against 23 individuals for $61.5 million in Medicare fraud.11 Even, Steady Steps in an Unsteady Banking Market Considering the endless reports of economic issues, here are a few steps for uncertain times: • Identifying Exposed Clients The fallout from bank failures will have far-reaching consequences. Many startups around the world are feeling the effects of the failures. One startup, which will feel this broad effect, is Etsy. Any company dependent on the craft site may experience delayed payments which will inevitably have a cascading effect. Several other companies include Roku, Circle, FarmboxRx, Nitro, and there could be many, many more. Identifying clients who may have direct or indirect exposure to bank failures may prevent an unpleasant surprise later. • Communications with Clients Fear and chaos often provide a foothold for fraudsters. Clients may be receiving emails from fraudsters prompting them to click on a link for information about their bank or the status of their deposits or prompting them to apply for a loan from the BTFB. Regular communications with clients during times of uncertainty can avert further scams, issues, and frauds. • Relationships with Companies Identifying key businesses with tight working capital accounts to discuss current and future working capital needs. Many potentially bad banking relationships will have red flags long before the accounts become liabilities. Those accounts may be identified with judicious monitoring and adjusting relevant thresholds for identification and reporting of the accounts. • Relationships with Regulators Although regular communications with regulators are not something naturally sought or maintained by most banks, the regulators may have key information on forthcoming regulations, requirements, metrics, measures, cybersecurity, and industry knowledge. Regulators may have insight as to the cause and fallout of banking failures and information about financial indicators which may be of interest for future engagements. • Relationships with Banking Partners The risks associated with larger loans may be shared with industry partners. Regular collaboration and communication with banking partners may lead to early intervention when necessary. Shared relationships can help distribute and share risk, but distributed communications may also result in red flags being obscured by the disparate knowledge base. • Relationships with Individuals Identifying key accounts which may be near, at, or over the FDIC-insured amount of $250,000 and working with those clients to ensure they are aware of and understand the limits of federal insurance limitations may avoid uncomfortable conversations later. Legal Fallout from SVB Finally, working with counsel to identify and monitor key cases resulting from the failures may provide important information as to the direction and nature of the resulting litigation. While bank collapses have occurred in the past, the collapse of SVB and Signature were caused by previously unanticipated circumstances and may result in new legal analysis, new case law, or nuanced judicial opinions which should be studied and incorporated into banking procedures. For more information, please contact Robert (Bob) Kardell at (402) 636-8313, bkardell@bairdholm.com, or visit www.bairdholm.com. ENDNOTES: [1] https://www.cnbc.com/2023/03/12/former-svb-employee-offersinsight-into-the-banks-failings.html#:~:text=The%20FDIC%20seized%20 SVB%20on,feared%20panic%20over%20the%20firm [2] https://financialpost.com/fp-finance/banking/silicon-valley-bankfallout-explained [3] https://www.hollywoodreporter.com/business/business-news/siliconvalley-bank-stocks-roku-analyst-1235350766/ [4] https://www.washingtonpost.com/business/2023/03/14/justice-deptinvestigating-silicon-valley-bank-collapse/ [5] https://www.fdic.gov/news/press-releases/2023/pr23018.html [6] https://www.lexology.com/library/detail.aspx?g=05d3b3a7-63a3-4eb7885f-1788dc59c3b3 [7] https://www.federalreserve.gov/newsevents/pressreleases/ monetary20230312a.htm [8] https://www.justice.gov/criminal-fraud/cares-act-fraud [9] https://www.IC3.gov [10] https://www.ic3.gov/Media/PDF/AnnualReport/2022_IC3Report.pdf [11] https://www.justice.gov/opa/pr/justice-department-charges-dozens12-billion-health-care-fraud 18
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