The rapid failures of several regional banks have prompted First Horizon Corp. to conduct new types of stress testing on its liquidity.
Speaking June 14 at an industry conference, First Horizon CFO Hope Dmuchowski said liquidity has always been a top priority for banks, and it has gained more importance after the demise of Silicon Valley Bank showcased "the amount of money that can leave your bank very quickly." In wake of the recent turmoil, First Horizon is examining how its liquidity would hold up when faced with rapid deposit outflows.
"We really haven't done a stress scenario as an industry of what happens in a 24 hour, what happens in a 48 hour," Dmuchowski said. "Really, what happened to First Republic Bank and Silicon Valley, I think, has us all rethinking how we think about those funds."
That discussion and planning was especially front of mind when First Horizon and The Toronto-Dominion Bank terminated their merger on May 4, three days after the failure of First Republic. It is the largest US bank deal termination ever.
"With the TD deal falling through, we had those discussions of what could a one-day run in our bank look like? How do we position for that?" she said. "Every bank out there is constantly thinking about what could a one- or two-day run look like."