from the Morning Brew
After Silicon Valley Bank rained volcanic hellfire upon the startup industry, some folks wanted to know: What do I do if my bank fails? Well, what if we told you there’s a way to keep an eye on your bank’s business practices that may make it easier to predict SVB-style mayhem? It all comes down to your bank’s balance sheet. But what’s a balance sheet, and why does it matter to the everyday bank customer?
Balance sheets are essentially financial statements.They cover a gaggle of capital ratios that can give shareholders an idea of a company’s financial health. For example, the asset-to-liability ratio—also known as the quick ratio—helps determine a bank’s solvency or its ability to repay your deposits.
So, where do you find these mystical troves of data? The FDIC has the info for all FDIC-insured banks (WSJ also keeps a log). For example, here’s US Bank. As you can see, in 2022, the bank’s net loans—$381,277—were less than the net deposits of $524,976. That’s a mark of good liquidity. And, in banking, liquidity is a good thing. Unless the liquid in question is, ahem, hellfire pouring from the sky. (Sorry, SVB.)—Lillian
