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Concentration risk is a killer.
Photographer: Justin Sullivan/Getty Images
"When small banks grow fast driven by a booming local industry and then the bubble bursts, you can be sure it’ll cause some mayhem. Just ask Texas. The collapse of Silvergate Capital Corp. this week and now the takeover of Silicon Valley Bank by the government aren’t a repeat of the Texas banking crisis of the 1980s, but they sure do rhyme.
There’s a ton of differences between what’s going on in California and what was happening Texas four decades ago, but concentration risk is the big harmony. And if these problems are going to spread like a virus to other regional banks, commercial real estate is likely to be a significant transmission vector."
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