Vermont Banks Say Their Customers' Deposits Are Safe 

The collapse of Silicon Valley Bank on March 10 set off a wave of worry across the world, and the ripples reached Vermont.

Some Vermonters whose payroll was deposited at Silicon Valley initially wondered whether they would still be paid. A few Vermont banks reported that customers moved money from out-of-state institutions into their Vermont accounts, saying they thought their deposits would be safer. And analysts expect that banks everywhere, including in Vermont, will become more cautious about lending money.


Silicon Valley Bank was the largest financial institution to fail since 2008. Signature Bank in New York was closed by regulators soon afterward. Talks have already started in Washington to figure out what went wrong, and House and Senate committees are planning hearings next week.

The crisis prompted national regulators and bankers to review operations at all of the nation’s financial institutions, with an eye toward preventing another failure.

Financial leaders in Vermont say it’s unlikely anything similar could happen in the Green Mountain State. When Silicon Valley Bank started running into financial problems, the news made its way to depositors with lightning speed. Bank customers shared their concerns on a 1,000-member channel of the communication app Slack. The panic was contagious, and users moved quickly, withdrawing $10 billion — one-fifth of Silicon Valley Bank's deposits — in just a few hours.

Vermont banks are unlikely to face alarm fueled by social media, said Cairn Cross, who cofounded the Shelburne venture capital firm FreshTracks Capital and worked in the banking industry for years.

“We’re just not connected that way,” Cross said. “Maybe you bump into someone at the gas station or you’re on Front Porch Forum. But we have a fairly diversified economy … and I can’t imagine there is a business community in Vermont that has a Slack channel with 1,000 business owners.”

Nonetheless, financial services leaders in Vermont are working hard to bolster the public’s confidence in banks large and small. For many who say they’re already operating conservatively, reassuring customers is the best means to prevent a panicked rush to withdraw money.

Industry sources, including Chris D’Elia, president of the Vermont Bankers Association, detailed just how different Vermont banking practices are from those of Silicon Valley Bank. The latter was founded in 1983 and claimed on its website that it was serving nearly half the companies in the nation that had received venture capital funding — as well as venture capital firms themselves.

About 90 percent of the deposits at Silicon Valley Bank were uninsured by the FDIC, D’Elia noted. That prompted many customers to move their money, fearful that the sums over $250,000 — the amount that the Federal Deposit Insurance Corporation insures automatically — would be lost in a bank run. The amount of such uncovered holdings in Vermont is unclear.

D’Elia pointed out that Silicon Valley Bank hadn’t had a chief risk officer keeping an eye on the bank for the better part of a year. And he noted that the deposits were concentrated in the tech industry, not spread among an array of sectors.

“There were a number of circumstances that created, if you will, a perfect storm,” D’Elia said. “In Vermont, we have very soundly run institutions that continually assess their risk. And we don’t have high proportions of uninsured deposits.”

Individual Vermont banks and credit unions reassured depositors. Scott Anderson, the manager of a Mascoma Bank branch in Burlington, emailed customers on March 13, writing that the bank’s strong balance sheet had sustained the institution for the last 123 years.

“Our business model is very different from the financial institutions that faced issues recently,” Anderson wrote. “Current events about bank failures may be nerve racking, but I’d like to assure you that Mascoma Bank is a safe place to keep your money.”

Kathy Austin, president and CEO of Community National Bank in Derby, said in a letter on the bank’s website that the U.S. banking system is on a solid foundation, thanks in part to reforms after 2008.

“We manage risk. Every. Single.Day. Our regulators hold us accountable,” she wrote. “We’ve been in business since 1851 and expect to serve this community for generations to come.”

Saying it was seeking to prevent economic fallout from the bank failure, the Biden administration announced it will guarantee all the deposits at the failed banks, not just the ones that are under $250,000.

That prompted a sharp rebuke from many quarters, including Sen. Bernie Sanders (I-Vt.).

“In America, if you're a wealthy vulture capitalist with over $250,000 in uninsured deposits at a loosely regulated bank, the federal government will guarantee that your money is safe in a weekend,” he tweeted on March 14. “If you have no health insurance and get cancer, you're on your own. Unacceptable.”

Sanders on Thursday introduced legislation that would block bank executives from serving on Federal Reserve Boards, noting that Gregory Becker, Silicon Valley Bank’s CEO, had served on the San Francisco Fed. Several news outlets reported that Becker sold $3.6 million worth of the bank's stock days before the collapse.

“It is clear to me and to the American people that the CEOs of the largest banks in America should not be allowed to serve as directors of the main agency we have in this country in charge of regulating those very same financial institutions,” Sanders said.