How the collapse of 2 financial institutions caused a Kansas City bank's stock to fall
Earlier this week, Silicon Valley Bank in California and Signature Bank in New York collapsed, prompting the Federal Deposit Insurance Corporation to take them into receivership. Then, it caused the stock of UMB Bank in Kansas City to drop.
Following the collapses of Silicon Valley Bank and Signature Bank that had the U.S. financial system on high alert, a Kansas City bank's stock plunged on Monday.
UMB Bank, which has the largest customer base of any bank in the Kansas City area, saw its stock price fall nearly 30% that morning. While it rebounded to about 15% just before the markets closed, as of Wednesday it hasn't come close to its previous price.
Finance professor Bill Keeton, of the University of Missouri-Kansas City, says UMB Bank was a victim of what economists call "contagion"; when the financial issues of one bank cause investors and uninsured depositors at another to worry.
"(UMB) also had a pretty high percent of uninsured deposits, though not as high as Silicon Valley Bank and Signature Bank," said Keeton. "Investors and depositors — just seeing that that, here was another bank that had a lot of uninsured deposits — they started selling the stock."
- Bill Keeton, associate teaching professor at the University of Missouri-Kansas City