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Perspective: Kentucky Banks are Reliable and Safe

Conservative approach by Kentucky banks is a public service

By Mark Green

Kentucky is conservative by nature, which has its pros and cons, but count it a big positive when national banks make the news for negative reasons. Kentucky banks are solid, reliable and safe.

Bank stability vaulted into headlines last month after a run on California-based Silicon Valley Bank. SVB, which reported $175 billion in deposits in 2022, focused on tech companies and especially startups—a big part of the business action on its home turf. Signature Bank, a $110 billion commercial bank focused on crypto companies, also failed in mid-March. It spurred a media frenzy and has customers around the U.S. shifting billions of dollars to the largest banks they can in a super-abundance of caution.

Customers of Kentucky banks have no need to follow suit. Rather, they might thank their bankers for their service.

Banks have essential roles in our economy. We seldom give a second thought about their reliability, because they are reliable.

Banks can’t fulfill their role, however, if they leave the safe high road. That is what SVB and Signature managers allowed to happen. In an article published a year ago, “Inflation Cheapens Growth Assets” (tinyurl.com/2rz4t2yc), Kentucky wealth managers told The Lane Report that rising interest rates would hit emerging tech companies hard. They were right.

It takes insight and savvy to manage and oversee banks. Bankers and regulators, as we have been reminded in the past month, are the quiet heroes we rely on. Proper government regulation protects us all.

Kentucky banks are primarily “community” banks and the business they focus on reflects economic activity in their service areas. Our state’s economy is diverse. The startup sector represents only a small portion, and Kentucky’s conservative banks do not get highly involved.

According to the FDIC’s annual market share report last June 30, Louisville-based Stock Yards Bank & Trust Co. is the largest bank headquartered in Kentucky, with state deposits of $5.7 billion plus $900 million out of state. Next was Pikeville-based Community Trust Bank with $3.96 billion in-state plus $500 million out of state. Louisville-based Republic Bank & Trust Co. had $3.93 billion in-state plus $920 million out of state.

The FDIC deposit market-share report shows that 158 banks operate in the state. Banks can obtain charters from their home state or from the federal government. One of the main differences is who regulates the bank.

The Office of the Comptroller of the Currency, conceived by President Lincoln and his Treasury Secretary Salmon P. Chase in 1863, supervises the 38 federally chartered institutions serving Kentucky—of which 23 are headquartered in Kentucky and 15 in other states.

The Department of Financial Institutions in Frankfort regulates the 101 state-chartered banks plus bank trust departments, independent trust companies, bank holding companies and bank technology service providers. DFI’s mission “is to serve Kentucky residents by promoting access to a stable financial industry, implementing effective and efficient regulatory oversight, enforcing consumer protections, encouraging economic opportunities and encouraging sound financial decisions through financial empowerment programs.”

Another 19 banks operating in the commonwealth are chartered in states other than Kentucky and regulated by those states.

When you add it all up, the Kentucky banking community is one of the nation’s safest.