INDIANAPOLIS (WISH) — According to one expert, banks in Indiana are feeling the pinch of what’s going on globally with struggling financial institutes, but, so far, it’s not as bad as in other parts of the country, or across the globe.
“Yes, the banks in Indiana are the size of the banks that are being impacted, but the banks in Indiana haven’t been impacted because they have a completely different portfolio of assets,” said Matt Will, a professor of finance at the University of Indianapolis.
He says Indiana bank portfolios are safer than other banks that have failed, or needed to be saved.
“The way a bank works is they take your deposits — your checking accounts, your saving accounts — and then they lend it out to someone else. In California, they’re lending out that money to ‘cryptocompanies’ and venture capital companies. Those are both really high-risk. Indiana doesn’t have either one of those industries to speak of and, therefore, we’re not really at risk like other parts of the country.”
Banks in Indiana, though, are not immune to what’s happening. The main thing hurting them is inflation and the Federal Reserve raising short-term interest rates, which may happen again this week.
“All banks in Indiana have experienced some losses as a result of interest rates going up. All the regional banks have reported these losses — you know, German American Bank, First Financial, Old National Bank — but they’ve been very small and well within the limits of what they can manage.”
The finance professor told I-Team 8 that if finance and government officials don’t handle the situation properly, the real risk is the banking crisis continuing and spreading from bank to bank. “If the inflation that we have in the economy does not come under control, the Federal Reserve Board will keep raising short-term rates and that will continue to hurt banks and even a strong bank at some point may not be able to withstand that.”
Will believes that Indiana banks “can withstand pretty substantial rate increases because they have very conservative portfolios.
“Yes, they will lose money when the rates go up, but it won’t be nearly as much as in other places of the country,” the professor said.