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Banks are not too big to fail anymore.
After the past few years high-profile bank failures – Silicon Valley Bank in Santa Clara, California; Signature Bank in New York City; Pulaski Savings Bank in Chicago – everyone’s talking about the need for stronger capital levels.
That’s not something Wendy Cai-Lee, the founder and CEO of Piermont Bank in New York, has to worry about. Her bank’s tier 1 risk-based capital (RBC) has been at 20% for the last seven consecutive quarters. The bank’s total RBC is at 22%. Even Piermont’s leverage ratio is at 14%.
Considering that a tier 1 RBC of 6.5% and a total RBC of 10% is considered well-capitalized, these are metrics worth highlighting.
“Being able to have that level of capital across all three major capital ratio key metrics for banks, we’re really proud of that, and that was without additional capital injection,” Cai-Lee told American Banker. “We’re operationally very efficient, and when we make investments, we put the money where it needs to go.”
For Piermont, a commercial bank set up in 2019 and focused on serving entrepreneurs, fintechs and fast-growing businesses, where that money needs to go into is technology that provides customers the same speed and sophistication they get from digital experiences outside the bank.
“You think about the innovation that’s taken place in the ecosystem in the last 5-7 years, it’s leaps and bounds compared to the previous decade,” Cai-Lee said.
The bank has aggressively invested in digital acquisition channels, allowing a new, young, tech-savvy breed of business owners to open an account and take care of their banking all online (if they choose to). “How are we OK as banks to have that gap where we know who’s owning and building small businesses, who the entrepreneurs are, and we expect them to be OK with banking experiences that were built for the older generations?” Cai-Lee said.
Cai-Lee saw that gap in the market as it relates to banking SMBs at the earliest stages of their journey. And even though there are 4,600+ financial institutions in the U.S., she believed there was room for one more.
According to Carla Brooks, an independent director of Piermont Bank who serves as the bank’s audit committee chair, Cai-Lee succeeded in this respect by being resourceful.
Brooks noted that Cai-Lee showed this reserve and capability when
“The current banking environment, particularly with respect to banking-as-a-service and fintech customers, means Piermont needs to be able to pivot quickly and efficiently to adapt to whatever situations arise,” Brooks said.