The failure of two U.S. banks in recent days poses a test of confidence – and of regulatory reassurance – at a time when the economy is already challenged by inflation and rising interest rates.

The failure of two U.S. banks within the past week does not constitute a banking crisis. Instead, it’s a worrying spark of fear that has been spreading. Consumers wonder whether their money is safe.

Some small businesses, especially tech startups, are scrambling to find new banks that can meet their needs such as making payroll.

How far the problem spreads will depend on the trajectory of the economy as well as on consumers’ confidence in their banks. For clues, watch the stock market, analysts say. If bank stocks fall further, that could signal trouble ahead for the economy. 

Last Wednesday, Silicon Valley Bank, based in Santa Clara, California, announced it had sold some of its assets at a loss and would sell new shares of itself to boost reserves. That triggered SVB customers to begin pulling out their money, causing a run on the bank. By Friday, regulators had taken over the bank.