85% of CFOs worried about bank failures

Gartner polled over 250 CFOs and senior finance leaders on 13 March 2023 on their responses to recent bank failures and financial sector instability.

The research found that 85 per cent of CFOs expressed concern about the impact of bank failures on their current operations, while 18 per cent noted they had some level of exposure to one of the failing banks.

The top actions CFOs are taking, or planning to take, include assessing their own funding sources for risk, educating the board on potential exposures, and evaluating customer exposure and payment risks.

More than one in four CFOs said they plan to diversify their deposits across more banks after recent high-profile bank failures, according to Gartner.

“The data shows that CFOs are clearly concerned about second and third-order effects from this unfolding banking crisis,” said Alexander Bant, chief of research in the Gartner Finance practice.

“While the immediate risks may have been stemmed by swift government action, CFOs are rightly assessing potential impacts to their own funding and that of their customers and suppliers.”

About one-third of CFOs are taking immediate action to reduce risk and ensure the viability of financing their organisations.

“CFOs have a short window to ensure security of their assets, payments, and funding in case things deteriorate further across the banking sector,” Mr Bant said.

Despite government assurances that uninsured deposits will remain accessible, there is a sense of uncertainty among some CFOs about how the crisis will evolve and there is a new focus on concentration risk for CFOs and their boards.

Mr Bant said the crisis has brought concentration risk into the spotlight, with some companies having upwards of 25 per cent of their cash reserves caught in a failed bank.

“The extent and nature of this crisis is still unclear and despite regulatory assurances, CFOs with concentrated positions at any one institution will prioritise diversifying their deposits as matter of urgency,” he said.

Federal Reserve Board chair Jerome Powell recently stated that the capital and liquidity positions of the US banking system are strong and the US financial system is resilient.

“Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation,” Mr Powell said.

However, he added: “The extent of these effects is uncertain.”

[Related: Fed Reserve steps in to help depositors following SVB collapse]