Silicon Valley Bank isn’t a completely isolated incident, it is part of a wider issue in the banking sector caused, among other things, by US banks sitting on around $620 billion of unrealized losses thanks to rising interest rates pushing down the value of bonds they count as assets. If banks can hold these to maturity there isn’t a significant problem; however difficulties arise when they need to sell these assets to raise liquidity, for example to pay depositors should there be a spike in demand for withdrawals. The FDIC and Treasury have done what they can to improve liquidity and to stand behind the full value of deposits (presumably all $17 trillion plus of them!), but confidence is still fragile and I would not be surprised if more problems surface here and there. It would be prudent for retailers to review their banking and ensure they have contingency and access to funds should any aspect of it become disrupted.

The trouble with easy money periods of accelerated growth is the reckoning that proceeds them. I’m not a banking sector expert but would expect further trouble in any business that took advantage of easy money to make questionable business investments. There’s some evidence of that in the massive tech layoffs as “profitability” has all of the sudden become important. There will be more instability across banks and all businesses especially those that invested poorly or had poor fundamentals. All other businesses will weather the storm as they always do and we will come out stronger, as often is the case.

Uncertainty piled on top of inflation can’t be a good thing. But SVB held a small slice of the overall pie and the government acted quickly to minimize the uncertainty. The whole incident though, is a great wake up call for customers to have a better idea of what their bank’s balance sheet looks like. The fact that a couple of other banks needed quick support also pulls back the curtain on the fragile position that some banks have wandered into. Safe and secure banking needs to be a no-brainer. There’s too much at stake to let banks get themselves into precarious positions.

Our confidence in our financial sector impacts our emotions and overall shopper sentiment. Consumer confidence is fragile and must be handled delicately by retailers and brands. Silicon Valley Bank’s challenges are not isolated incidents and represent a much more significant issue in the banking sector. Silicon Valley Bank experienced a run precipitated by a decline in start-up funding, rising interest rates, and the firm’s sale of government bonds at a considerable loss to raise capital.

We are in a tenuous situation with our financial markets, especially with banks such as First Republic being rescued by the banking industry. The economic headwinds, the relentless news cycle focusing on the looming financial crisis, a potential housing crisis, ongoing inflationary challenges, continued tech layoffs, retailer restructuring, and consolidations are all factors to be considered when forecasting retail sales.

Retail is a resilient and enduring industry. However it is not immune or protected against these macroeconomic forces.

Like all things in business, regulations and oversight strategies need to be checked and updated regularly to keep up with changing times. A thorough stress check and fresh set of eyes is needed for the entire banking system, even if just to give businesses the reassurance and confidence to continue to invest in their business.

Maybe there should be a law preventing commercial banks from acting as investment banks. WAIT! There used to be just such a law. Commercial banking is supposed to be boring. Maybe it is tough to be boring in Silicon Valley.

The government’s quick action drove the hysteria off the front pages and communicated confidence to bank customers around the country and the world. We all learned much from the 2008 financial crisis. We didn’t learn that it isn’t just big banks that misbehave.

As Congress considers strengthening the laws weakened in 2018, bank lobbyists will descend on the Capitol to prevent regulation that will help the banks not default. Is it hubris or incompetence?

I definitely think we are in for more uncertainty and fallout from the SVB collapse. At a minimum, consumer confidence will be threatened, and at worst more retailers will be directly impacted like Camp. The eternal optimist has hope that the SVB collapse will provide the impetus for stricter regulations of the financial sector, but the realist in me looks at our political environment and realizes we are likely in for more turmoil, rather than actual progress and prevention.

For a second, the SVB collapse had the potential to negatively impact several retail tech companies that had major deployments underway at retailers of all sizes and in all channels. Just for a second. Cooler minds quickly prevailed and we’re at a place where the sector still faces challenges but nothing near the existential situation a week ago.

Congress passed Dodd-Frank in the aftermath of the 2008 crisis to increase transparency and accountability. Those regulations were dumped after lobbying by the previous administration. We need to again rein in big financial institutions that want to benefit from risky investments, bailed out by taxpayers when they fail.

On the consumer macro level anything that disrupts consumer confidence is bad for retail. This will contribute to the tightening of some wallets and reduce discretionary spending. On the technology and innovation macro level it will not make a notable difference. Retailers will continue to use their existing budgets to innovate and independent innovators with feasible concepts will continue to find PE funding.

Will the current financial instability eventually cause issues for many more retailers? Many retailers (and people) are sitting on edge because of the current bank events. Everyone needs to settle down, keep their heads in their business, and follow the news.