Cyprus, part 3 -- The Butterfly Effect

For those new to my discussion of Cyprian events, please start here.  For the rest of you...

FACT:  U.S. banks, large and small, are in much better shape than those in Cyprus.  There is plenty of data to support this statement.  

OPINION:  U.S. depositors should have nothing to worry about come Monday morning.

FACT:  People don't always act rationally.

OPINION:  U.S. bankers should be prepared to help their customers understand what happened, and why it is not likely to happen here.

In the post-Lehman banking world, regulators and examiners have placed an emphasis on contingency funding plans, liquidity planning and stress testing.  If your bank is not up to speed on these topics, it's time to get there, and quickly.  I have no reason to expect a panic or bank run in this country, but I wouldn't be surprised if depositors begin to think more about where, and how, their wealth is stored.  Some folks are likely to feel that Grandpa's tin can in the back yard and Crazy Uncle Joe's gold and silver in foreign vaults are sounding better each day...

If deposits leave your bank, how will you respond?  Cheap deposits have played a crucial role in maintaining net interest margins as assets repriced downward.  If deposits become more expensive due to a perceived increase in risk, what shall we do?


Lesson 1: Greece; Lesson 2: Cyprus - Pay Attention