With investors fearing additional failures, major U.S. banks lost around $90 billion in stock market value on Monday, bringing their loss over the past three trading sessions to nearly $190 billion. Regional banks were hit the hardest. Shares of First Republic Bank tumbled more than 60% as news of fresh financing failed to reassure investors, and so did Western Alliance Bancorp and PacWest Bancorp .
Europe first felt the shock waves. The STOXX banking index closed 5.7% lower. Germany's Commerzbank fell 12.7%, while Credit Suisse slid 9.6% to a new record low. Biden said his administration's actions meant "Americans can have confidence that the banking system is safe," while also promising stiffer regulation after the biggest U.S. bank failure since the 2008 financial crisis. "Your deposits will be there when you need them," he said. SVB's meltdown sparked a partisan battle in Washington on Monday, with Democrats arguing that a Trump-era change to bank oversight rules undermined the stability of regional banks. "Let's be clear. The failure of Silicon Valley Bank is a direct result of an absurd 2018 bank deregulation bill signed by (Republican former President) Donald Trump that I strongly opposed," U.S. Senator Bernie Sanders said in a statement. Republicans rejected the idea that the changes made during Trump's four years in the White House were to blame.
CRISIS AVERTED? In the money markets, indicators of credit risk in the U.S. and euro zone banking systems edged up.
"When a step (is taken) this big, this quickly, your first thought is 'crisis averted.' But your second thought is, how big was that crisis, how big were the risks that this step had to be taken?" said Rick Meckler, partner at Cherry Lane Investments. Emboldened by bets that the U.S. Federal Reserve may have to slow its rate hikes, and with investors seeking safe havens, the price of gold raced above the key $1,900 level. "There is a sense of contagion and where we see a repricing around financials is leading to a repricing across markets," said Mark Dowding, chief investment officer at BlueBay Asset Management in London.
SVB's customers will have access to all their deposits from Monday and regulators set up a new facility to give banks access to emergency funds and the Fed made it easier for banks to borrow from it in emergencies. On Monday morning, U.S. bank regulators sought to reassure nervous customers who lined up outside SVB's Santa Clara, California, headquarters, offering coffee and donuts. "Feel free to transact business as usual. We just ask for a little bit of time because of the volume," FDIC employee Luis Mayorga told waiting customers. The first customer, who did not want to be named, said they arrived at SVB at 4 a.m. Regulators also moved swiftly to close New York's Signature Bank, which had come under pressure in recent days. "A serious investigation needs to be undertaken on why the regulators missed red flags ... and what needs to be overhauled," said Mark Sobel, a former senior Treasury official and U.S. chair of think tank OMFIF.
FALLOUT
Companies around the globe with SVB accounts rushed to
assess the impact on their finances. In Germany, the central
bank convened its crisis team to assess any fallout.
After marathon weekend talks, HSBC said it was
buying the British arm of SVB for one pound ($1.21).
While SVB UK is small, its sudden demise prompted calls for
government help for Britain's startup industry, and its heavily
exposed biotech sector in particular.
Prime Minister Rishi Sunak added his voice to those in the
UK saying there was no concern about systemic risk.
"Our banks are well capitalised, the liquidity is strong,"
Sunak told ITV during a visit to the United States.
A furious race to reprice interest rate expectations also
sent waves through markets as investors bet the Fed will be
reluctant to hike next week.
The Fed's options are limited, said Sobel. "The Fed could
cut rates, but that has its own drawbacks. So the Fed and
Treasury have kind of shot their bazooka for now. I think it's a
question of the market steadying out. Is this a one-off
adjustment in regional banks, or does it portend more to come?"
Traders currently see a 50% chance of no rate hike at that
meeting, with rate cuts priced in for the second half of the
year. Early last week a 25 basis-point hike was fully priced in,
with a 70% chance seen of 50 basis points.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
ANALYSIS-SVB's lightning collapse stuns banking industry FACTBOX-SVB collapse may prompt Fed to go slow on rate hikes
[ nL4N35L2ND]
FACTBOX-Which companies are affected by SVB collapse? GRAPHIC-SVB collapse a sign of pain coming from end of easy-cash
era Euro zone bank supervisors see limited hit from SVB collapse INSTANT VIEW 3 -Bank stocks tank, markets rethink rate-hike path Major crypto coins stabilise after U.S. intervenes on SVB
collapse Swiss regulator monitoring banks and insurers after SVB collapse GRAPHIC-The Rise and Fall of SVB and Signature Bank Market stress indicators begin to flash after third U.S. bank
folds First Republic able to meet withdrawal demands with JPMorgan
funding BREAKINGVIEWS-Bank rescue buys stability at a high price SVB shock could have chilling effect on British biotech sector The Rise and Fall of SVB and Signature Bank SVB, Signature Bank are first bank failures since 2020 Key gauge of bank stocks slumps to near 3-year low The Rise and Fall of SVB and Signature Bank SVB, Signature Bank are first bank failures since 2020 SVB,
Signature Bank are first bank failures since 2020 How Silicon Valley Bank's collapse ripped through global tech Silicon Valley Bank collapse: What you need to know ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Trevor Hunicutt in Washington, Alun John in
London and Rae Wee in Singapore
Additional reporting by Heather Timmons, Pete Schroeder, Andrea
Shalal, Ashraf Fahim and Julio-Cesar Chavez in Washington,
Jonathan Stempel in New York, Noel Randewich in Oakland,
California; Valentina Za in Milan, and Amanda Cooper, Dhara
Ranasinghe and Lucy Raitano in London
Writing by Alexander Smith and Matthew Lewis
Editing by Elisa Martinuzzi, Catherine Evans, Richard Chang and
Anna Driver)
