How to Put Your Personal Finances Through a Stress Test
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Here's your money briefing for Wednesday, March 22nd. I'm J.R. Whelan for The Wall Street Journal. The collapse of Silicon Valley Bank almost two weeks ago cast a spotlight on the nation's banking sector and the ability of banks to weather a stress test. It's also given people jitters about their own finances.
You're seeing these headlines and your response may be to freak out and your response may be, I don't care, it doesn't affect me. I don't think either of these are the right responses.
Your response is to do something. We'll talk to WSJ editor Jeff Rogo about giving your personal finance a stress test. That's after the break.
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The collapse of Silicon Valley Bank and concerns over the health of the broader banking sector have reintroduced the idea of putting banks through a stress test to gauge their ability to operate during a hypothetical emergency. So how would you do a similar top-to-bottom checkup with your own personal finances? Jeff Rogo is a Wall Street Journal editor who works with our personal finance team, and he joins me with more.
What immediate concerns did the collapse of Silicon Valley Bank raise for everyday banking customers?
Hey Jeff, thanks very much for being with us. Thank you for having me. So Jeff, when we hear the term stress test as it pertains to banks, what does that usually entail? So every year, the Federal Reserve takes the largest banks in the country
and provides a disaster preparedness situation. So it looks at what if we lose X percent of jobs, what if there's freezes in the credit market, and looks at what happens in these scenarios to banks' finances, their capital ratios, their funding, how strong are they in a situation if a bunch of bad stuff happens. And at the end, they all get a grade.
All right. So why is now a good time to put your own personal finances through a similar test?
Over the last two weeks or so, everyone's kind of freaked out because one enormous bank in California has failed. Another large bank in Europe had to be bought and a bunch of regional banks are under pressure. You're seeing these headlines and your response may be to freak out and your response may be, I don't care, it doesn't affect me. I don't think either of these are the right responses. Your response is to do something. And what you can do is stress test your own finances. And I think there's concrete ways that you can go about and see, am I okay if there's my own personal sort of bad situation?
So let's go through that test. A lot of people do their banking. They might have their savings, their mortgage, their car loan, even their small business finances at one institution. Wouldn't that make it easy to run their money through a test? It's convenient as a consumer.
So as a consumer, having all of your stuff in one place is really easy. It's one app. It also is probably what the bank has been telling you. Since the financial crisis, one of the big things banks have done is this idea of cross-selling. Let's get a customer in the door, and by doing that, we can offer them all these other products.
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