Why Banks These Days Are So Excited About Being Boring

A year ago, as regional lenders found themselves thrust into the public spotlight, banking was anything but tedious. For an industry underpinned by trust—the belief that customers’ deposits will be safe—the rapid implosion of Silicon Valley Bank and two other large regional institutions offered a heart-stopping glimpse of a less-than-boring financial sector.

In a few frenetic days in March 2023, SVB plummeted into receivership. Even as the government stepped in to guarantee all deposits at the troubled institutions beyond the normal insurance limits, investors recoiled and skittish consumers and corporations increasingly directed their business to behemoths like Bank of America, Citigroup and JPMorgan Chase. That set off intense competition among smaller lenders, who saw margins shrink as they increased the interest rates they paid on deposits to win new customers and retain existing ones.

Now, regional banks are working to rebuild trust and explain all the ways they’re not like the high-flying companies that failed. And the industry is coalescing around a new image: stodgy, stuffy and dull. “Banking should be boring,” says Mike Mayo, a Wells Fargo & Co. analyst who’s covered the sector for decades. “It should be like turning on the faucet and seeing water run out.”

Bank executives and analysts have uttered the word “boring” at least a dozen times on conference calls this year, double the level of all of 2022, before the SVB meltdown. Throw in terms such as “cautious” and “conservative” and widen the lens on the tumult of last year, and you get to the most ardent embrace of the humdrum in a decade or more. In its TV spot, for instance, PNC tells viewers it’s so pedestrian and dependable that its customers don’t need to be. In a crisis, “banks that are boring and do their basic job tend to leapfrog the banks that are trying to be heroic in an industry that doesn’t need heroes,” says CEO William Demchak.

The tension between these forces exploded as more and more clients pulled cash from the bank and SVB had to sell the securities at a loss. Then an attempt to raise capital fell apart as the stock plunged. Depositors yanked additional billions, and SVB collapsed into receivership. New York’s Signature Bank and San Francisco-based First Republic Bank, similarly plagued by fleeing depositors, soon suffered the same fate.

Politicians and academics have long made the case that regulators should force banks to be as uninteresting as possible. In the wake of last year’s failures, Massachusetts Democratic Senator Elizabeth Warren told CNBC that she wanted banking to get back to “where it ought to be, and that is boring.” Lev Menand, an associate professor at Columbia Law School, says banks should be treated like utilities. But deregulation that began in the 1980s has allowed lenders to build nationwide networks and seek to supercharge profits with riskier bets on the market. “You don’t get up one day and worry that your electric utility company is going to fail,” Menand says. “It used to be like that with banks.”