I’ve purposely waited an extra week to send an update. I know that many of you are involved with SBA lending and other matters. But I thought it was time to revisit and expand on my comments about about cash and the possibility for a run on an institution or across the industry.
First, it is important to note that there is not a shortage of cash. However, we’ve already seen irrational hoarding of other things, which seems to be continuing. In particular, consider how fast via social media both right and wrong information can travel. So let’s start with the basics:
First, as I said recently to you, don’t let your ATMs run out of cash. It may see like only an operational issue, but I guarantee you it will create a PR problem for you and perhaps your competitors.
Second, take time to do some employee training and education about the matter. Employees need to realize that offhanded or joking remarks about running out of cash are never appropriate. Especially now. For example, a teller who says “I’m out of 20s” means that he or she needs to buy some from the vault, not that the bank physically doesn’t have any 20s. But customers don’t know this. Further, while the public doesn’t understand our fractional reserve system, your employees should understand and appreciate it, and know that we do not have 1 to 1 cash on hand for all demand deposit accounts. As with ALL PR situations, employees should be reminded that (unless they are the corporate spokesperson) that they should not casually or officially attempt to speak on behalf of the bank. This includes their own social media accounts. There’s just too much room for interpretation.
Third, especially now, be alert to fraud being perpetrated on your customers. Any requests for large withdrawals that seem unusual should be gently investigated. This will be a bit more challenging as it may be through the drive up, but you still need to be alert to unusual activity. Perhaps you will intervene in a fraud situation, or if the person feels the need to hoard cash, you can engage with them to alleviate their fears. For most people, the additional risk of large sums of cash on their person or in their homes is more of a liability than a benefit - risk of loss, theft, or destruction in the case of fire or storm damage. You know the drill, but don’t assume that customers do.
Fourth, talk openly with your staff about what a run looks like, and how to respond. You will know something is wrong through customer activity (the drive in lanes are full, and around the building) or you are seeing posts on social media encouraging hoarding, etc. Again, gently inquire about the requests for large sums. SLOW DOWN. Count and recount, slowly and purposefully. Immediately begin limiting the dollar amount of cash withdrawals to ensure that all customers have access to reasonable sums. Have a plan now for acquiring more cash if you see that you will need it. Be prepared to support other local institutions if you can. In today’s environment, again because of social media and rumors, this is likely to be a widespread event, not limited to a particular institution.
Finally, try to extrapolate short term and long term education points from this particular component of today’s environment. Nothing you do here will be wasted when the current situation is resolved, so take the time to document your efforts, and update your policies, procedures, training and employee manuals to reflect best practices.
My best to you and your staff as you work to serve customers and maintain your business.
I’m here to help. Call, text or email, day or night.
Trent Fleming
901-896-4007
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