Banking lobbyist bans staff from using terms like ‘bank failure’

The American Banking Association isn’t wild about the phrase “bank failure” and is instead telling staff to give the crises at Silicon Valley Bank and Signature Bank gentler monikers such as “idiosyncratic liquidity disruption,” sources told On The Money. 

The banking trade group is telling staff to say the banks that went belly up simply “closed” and avoid phrases like “liquidity crisis” or “failure” in all speeches, emails, and conversations, a source adds. 

ABA CEO Rob Nichols has been trying to push the talking point over the last few weeks — and his efforts were on full display during the group’s annual summit last week.

Nichols hosted a fireside chat with Treasury Secretary Yellen where he avoided using banned words like “failure” or even “bailout.”

Instead, he referred to the recent fiasco as “a time of stress” and referenced the Biden Administration’s depositor rescue response as “extraordinary action.”

In a keynote address that same day he urged banks to “remain calm” in the face of an “idiosyncratic liquidity disruption.”

The talking points at the ABA – which lobbies for large and regional US banks — are being met with derision by insiders, who fret that it sounds more like “doublespeak” than legitimate talking points.

“They think it helps public confidence but any time you say things people don’t understand, and seem dishonest about it, it undermines it,” a source close to the situation told On The Money. “It is being mocked internally.”

Still, it doesn’t look out of step with the Biden Administration.

In a joint statement from the Federal Reserve, Treasury and FDIC announcing depositors would be protected, officials avoided using the phrase “bailout” and instead called it a “special assessment.”

The statement noted, “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

It’s a dramatic turn from the ABA’s harsh rhetoric last year after the FTX failure.

In a December op-ed, Nichols slammed the FTX fiasco as a “liquidity crisis and spectacular collapse” akin to the 2008 financial crisis, and added it “has updated the concept of a bank run.”