Bank Crisis Widens as Signature Topples, Funding Props First Republic

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The US bank crisis deepened on Monday as the financial industry continued to reel from last week’s closure of important venture capital lender Silicon Valley Bank and its parent. SVB Financial ,SIVB) Friday – marking the second largest bank collapse in US history. On Sunday, Regulators Shut Down Crypto-Focused signature bank ,SBNY) and transferred the properties to Bridge Bank while the agencies search for a buyer. Investors continued selling of bank shares in the early hours of Monday.


bank stocks reel

Financial stocks continued to slide on Monday as investors got a feel for the extent of the bank crisis that began on Friday. First Republic, FRC stock, fell nearly 68% to 26.45 on Monday after sliding nearly 15% on Friday. shares of Western Alliance Bancorp ,wall) dropped 80% on Monday morning after 20.88% lower on Friday. PacWest Bancorp ,pacw) fell nearly 52% on Monday after falling 37.9% before the weekend. zions bancorp ,Zion) retreated 34% on Monday.

charles schwab ,schw) slumped over 16% on Monday morning after falling 11.7% on Friday. Bank of America ,BACIt weakened about 4.3% in early trade after Friday’s low.

JPM stock pared early losses on Monday to less than 0.5%. It climbed 2.5% on Friday, one of the day’s few banking bright spots.

Bank crisis: Signature Bank closed

On Sunday, state regulators closed New York-based Signature Bank and appointed the FDIC as receiver. Signature Bank is the 20th largest bank in the US and almost 30% of its deposits come from crypto customers.

The FDIC transferred all deposits and “substantially” all assets to Signature Bridge Bank. A bridge bank is a full-service bank operated by the agency as it markets the institution to potential bidders.

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As of December 31, Signature Bank had total assets of $110.4 billion and deposits of $82.6 billion. Signature Bank operations and banking activities will resume from Monday, March 13. In a joint press release on Sunday, Treasury Secretary Janet Yellen, Fed Chair Jerome Powell and FDIC Chairman Martin Gruenberg approved risk exceptions for Signature Bank to address fears of a bank crisis.

“Today we are taking decisive action to protect the American economy by strengthening public confidence in our banking system.” The regulators wrote in the release, “This step will ensure that the US banking system continues to fulfill its important role of protecting deposits and providing households and businesses with access to credit that fuels strong and sustainable economic growth.”

A special assessment on banks

Regulators approved similar risk exceptions for Silicon Valley Bank. Shareholders and certain unsecured debt holders will not be protected. In addition, the executives removed senior management as per the announcement. Any loss to the Deposit Insurance Fund to support uninsured depositors will be recovered by special assessment of banks, as required by law. And on Sunday, the Federal Reserve Board announced it would make additional funding available to eligible institutions to ensure banks have the capacity to meet the needs of all their depositors.

“The US banking system remains resilient and on a solid foundation as a result of reforms undertaken following the financial crisis, which ensure better safeguards for the banking industry,” the regulators wrote. “Those reforms combined with today’s actions demonstrate our commitment to taking the necessary steps to ensure that depositors’ savings are protected.”

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First Republic raised funds

on Sunday, First Republic Bank ,FRCreceived additional liquidity from the Federal Reserve Bank and JP Morgan ,jpm) to enhance your operations. The additional borrowing capacity brings total available, unused liquidity for operations to more than $70 billion, the company announced in a press release.

“First Republic’s capital and liquidity position is very strong, and its capital is well above regulatory limits for well-capitalized banks,” CEO Jim Herbert said in the announcement.

PacWest Operations Update

Following the Silicon Valley Bank failure on Friday, PacWest Bancorp issued an operations update on its current liquidity. PacWest listed $41 billion in assets and $33.2 billion in deposits as of March 9. The Los Angeles-based bank has $28.3 billion in loan balances, $1.9 billion in cash on hand, $5.3 billion in liquid securities and about $2 billion available from the Federal Reserve. discount window.

CEO Paul Taylor said, “While the banking industry is experiencing significant volatility in light of recent events, we want to reiterate that Pacific Western Bank is a well-performing, well-established, A diversified, full service commercial bank. said in the release. “We have been a proven partner to our customers through all economic cycles and are actively adapting to the current economic environment.”

You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison

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