The Silicon Valley Bank (SVB) crisis that started this month has become the second-largest bank failure in the history of the United States. The failure has brought into question the systemic risk within our banking system and our ability to manage payrolls in times of financial crisis. As HR leaders, it’s important to understand the measures being taken by regulatory agencies and the potential impact on payroll management within our organizations.
Measures taken by the Federal Deposit Insurance Corporation (FDIC)
To manage the effects of the SVB collapse, the FDIC has created the Deposit Insurance National Bank of Santa Clara (DINB) and is guaranteeing access to SVB accounts, regardless of insurance limits. These measures have helped create some stability in the system and have ensured that most companies can still make payroll and have funds available.
The potential impact on payroll management
While the events of the SVB collapse have not yet affected most organizations’ ability to deliver payroll, the crisis raises questions about our ability to manage payrolls in the future. HR leaders must take a proactive approach to ensure that their organizations are prepared for future crises that may affect their banking partners.
Importance of avoiding panicked decisions
Making panicked or rash decisions often leads to costly and avoidable mistakes in times of financial crisis. HR leaders must be careful to approach payroll management calmly and rationally during times of crisis.
During a recent press conference, President Joe Biden spoke directly to small businesses, stating that the deposit accounts at these banks could rest easy knowing that they will be able to pay their workers and bills on time. This assurance from the President is important for small businesses that may be worried about the potential impact of the crisis on their ability to pay their employees.
Considerations for HR leaders managing payroll
HR leaders must consider the size and scope of their banking institution when managing payroll for their organization. This includes choosing a payroll partner that can deliver the necessary functionality, support, and training while also meeting all regulatory requirements. Organizations that outsource payroll to a vendor must also choose a partner that meets specific certification requirements, such as “strong core practices and corporate governance,” and has “proper controls in place to manage risk.”
Certification requirements for third-party senders
Third-party senders must meet the Nacha certification requirements to be considered. These requirements include having strong core practices and corporate governance, and having proper controls in place to manage risk. Meeting Nacha certification requirements is essential for third-party senders, as it demonstrates their high level of accountability and responsibility to their clients.
The collapse of Silicon Valley Bank is a wake-up call to all leaders about the systemic risk within our banking systems. As HR leaders, it is our responsibility to ensure effective payroll management in times of crisis. We must be proactive in our approach to selecting banking partners and choosing payroll vendors that meet certification requirements. By taking these measures, we can ensure that we are prepared to manage payrolls in times of financial crisis while avoiding costly and avoidable mistakes.