An aspect of the banking problems on both sides of the Atlantic is the attitude of healthier rivals and their approach on whether – or not – to take clients fleeing from stressed firms.

US bulge-bracket banks including JP Morgan, Citigroup and Bank of America have reportedly warned employees not to worsen matters by poaching clients.

JP Morgan, the nation's largest bank, told all employees (source: Reuters, 23 March) that they "should never give the appearance of exploiting a situation of stress or uncertainty," according to a memo. "We do not make disparaging comments regarding competitors."

On the same day, the leaders of its consumer and business banking unit told branch employees: "We should refrain from soliciting client business from an institution in stress," reports said.

The article, citing unnamed sources, said that Citigroup has also given similar guidance to its business heads. The guidance includes not speculating about other banks or market rumours. WealthBriefing and its sister publications understand that a recent memo went to Citi bankers to “remind you that while we should always be proud of the services we offer when seeking customer businesses, we should not discuss the standing or condition of other banks as part of those discussions.”

Top executives at Bank of America were also briefed that their employees should not be going after the customers of distressed firms or doing anything to exacerbate the situation, the report quoted a source as saying. 

The report also quoted Mary Mack, CEO of consumer and small business banking at Wells Fargo, saying in a memo: "We should not engage in any activity that could be perceived as taking advantage of the current situation to the detriment of others."

This publication has contacted the banks for comment and may update this report in due course if or when the firms respond.

There are concerns that because of bank runs that demolished Silicon Valley Bank and Signature, the second and third largest lenders to fail in US history, customers have shifted about half a trillion dollars of deposits from the "most vulnerable" US banks to bigger institutions this month, Reuters said, citing JP Morgan analysts led by Nikolaos Panigirtzoglou.

In Europe, the collapse of Credit Suisse and its purchase by UBS comes after the stricken lender suffered more than $110 billion of net outflows in the last quarter of 2022 alone. And while the UBS purchase – made at the behest of the Swiss authorities – may stem some of the outflow, it is not guaranteed to do so. (See related thoughts here.)

One possibility of the drama is that it may encourage clients, such as high net worth individuals, to completely re-think where they deploy their investments and cash. The banks’ problems have also turned a spotlight on the level of protection that depositors can, or should, receive from the US taxpayer. A decision by the US federal government to “backstop” all deposits in SVB, for example, has drawn criticism that this will fuel â€śmoral hazard” across the system and add to US public debt.