One of the preliminary lessons learned from the recent bank failures is that bank management, and their boards of directors, should be prepared to test the banks’ ability to manage liquidity needs during times of stress. This is one area where I think bankers can make an important, immediate contribution.
I strongly encourage bankers to consider creating a plan to handle liquidity needs during times of unexpected stress—and then test the ability to execute the plans. Adverse conditions can escalate quickly, and influences beyond a bank management’s control, including irrational actors, can impact your business in very short order.