During a deposit scare, stop advertising and start publishing
When depositors are frightened, reassurance reads as alarm and a rate special reads as need. A bank should suspend its advertising, publish within a day the figures depositors are asking about and keep its offers until the fear has passed.
My position is simple to state and was hard to hold in March 2023. When a bank's depositors are frightened, its marketing department should stop advertising, refuse to say that money is safe and publish, within a day, the figures a careful depositor would ask a banker for. Offers designed to attract new money should wait until the fear has passed. Almost every instinct a bank's leadership feels that week points the other way.
I am not arguing that advertising caused the outflows of 2023, or that publishing figures would have saved the banks that failed. Their problems lay in their balance sheets and their depositor bases, and no page of plain English changes a balance sheet. My claim is narrower. In a confidence event, a bank's communication either helps depositors make a calm decision with accurate facts or adds noise that makes them decide faster. Marketing controls more of that noise than most boards realise.
Reassurance is a claim, and frightened readers test claims
On Monday 13 March 2023 Ledgemoor's centenary campaign was running across three states under the line A hundred years of steady. It had been written in 2021 to mark a charter anniversary, and on any other Monday it was a perfectly good advertisement. That morning it read as an answer to a question nobody had yet asked us aloud. Two depositors forwarded a screenshot to their relationship managers with a one-word message: why?
Our leadership's first instinct, which I shared for about an hour, was to replace it with something stronger. Draft headlines circulated saying that customers' money was safe. The difficulty is that a frightened reader does not receive reassurance as information. She receives it as a claim and tests it at once. Safe for whom? Above what balance? Says who? A bank that calls money safe invites exactly the question it cannot answer in a headline, because for a depositor with US$900,000 in an operating account the honest answer depends on insurance limits, ownership categories and the bank's liquidity, none of which fit on a billboard.
There is a legal edge as well. The FDIC's rules prohibit misrepresenting whether and how deposits are insured, and a broad safety claim from an insured bank invites a reader to believe something about coverage that may not be true for her balance. Our general counsel made that point within minutes, and it settled the argument faster than my view about tone had.
We suspended every paid advertisement that afternoon, including search advertising for deposit products, and told our agencies to hold anything scheduled. Silence in paid channels was a decision rather than an absence, and we said so internally so that nobody reinstated a campaign by accident.
Publish what a depositor would ask a banker
What frightened depositors wanted, as far as our relationship managers could tell from hundreds of calls, was not comfort. It was four facts. How much of the bank's deposits sat above the insurance limit? How did coverage work for their own accounts? What could the bank draw on if many people withdrew at once? And was there a way to keep a large balance with us inside the limit?
We published a page answering those questions by Tuesday afternoon. It gave our share of deposits above the limit, the number of accounts above it, how coverage applies by ownership category with three worked examples, the categories of liquidity available to us described in general terms, and how a reciprocal deposit network could spread a large balance across many insured banks while the client kept one relationship with us. Every figure matched what the company had disclosed or furnished to the market that day. Our general counsel would not have allowed anything else, and a listed bank should not want anything else. The page was read about 380,000 times in two weeks.
The figure our chief financial officer worried about most was the uninsured share, 38% at the end of 2022. She feared that printing it would alarm people. I argued that sophisticated depositors already knew it from our filings, and that everyone else would trust us more for showing it than they would distrust the number. I cannot prove that from one episode. What I can say is that outflows stopped after ten business days at US$1.3 billion, 8.2% of deposits, and that in our client research that summer the facts page was the communication commercial clients mentioned most often, ahead of their relationship manager's call.
Publishing quickly depends on having written the page before it is needed. We had not. We built ours in a day because finance and legal colleagues dropped everything, and the first version contained errors we corrected by Thursday. Ledgemoor now keeps the page drafted, refreshes it each quarter with disclosed figures and rehearses its release once a year, including the decision to stop all advertising.
Leave the rate special in the drawer
The hardest argument that week was not about reassurance. It was about rates. Our head of consumer banking proposed a 5.25% seven-month certificate of deposit for new money, well above what we were paying. His reasoning was sound on its face: if deposits were leaving, attract new ones. Plenty of banks did exactly that in the spring of 2023.
I opposed it for the first weeks, for two reasons. A conspicuously high rate in a frightened week tells everyone watching that the bank needs money, and the people most likely to respond are the most rate-sensitive depositors, who will leave again for the next special. And a new-money offer tells existing customers, the ones we were asking to stay, that the bank values a stranger's deposit above theirs. When we did launch a certificate in April, it paid 4.60% and was open to existing customers on the same terms as new ones.
That choice had a cost. Our treasurer estimated that we forwent US$250 million to US$350 million of deposits that went to banks paying more. I accept the estimate, and I would make the same choice again, but I would not pretend the money was imaginary.
Three objections deserve an answer. The first is that silence looks like paralysis. It does not, if the bank's people are visibly on the telephone and its facts are visibly published. The second is that a smaller bank cannot afford to stop advertising for a fortnight. It can afford that more easily than an advertisement that speeds up withdrawals. The third is that facts can frighten. They can, which is why they should be written for a depositor, with worked examples, rather than lifted from an investor presentation.
The test I would offer another bank's board is short. Ask the chief marketing officer who can stop every paid advertisement within an hour, and whether that person knows it. Ask to see the facts page that would be published tomorrow, with this quarter's figures. Then ask what offer the bank would make to new depositors in a frightened week, and what that offer would say to the customers you most want to keep.