European bank stocks fell on Wednesday, with Credit Suisse diving as much as 30% on renewed investor concerns about stresses within the sector.
The U.S. measures came after heavy pressure from California's tech industry to act and fueled several long and dramatic days in Washington and beyond.
THURSDAY, MARCH 9 As U.S. Treasury Secretary Janet Yellen prepares for a Friday hearing before the Republican-controlled House Ways and Means Committee, investors are raising concerns about a liquidity crisis at Silicon Valley Bank, sending the stock plummeting.
Questions had been swirling for weeks around the tech-focused bank, which had assets of $209 billion, and a quickening pace of withdrawals triggered alarm bells. Amid concern the bank would not last the weekend, the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Board decide to move it into receivership.
Yellen's staff plan a meeting with the Office of the Comptroller of the Currency, the Fed and the FDIC for Friday.
FRIDAY, MARCH 10 Officials arrive to close the bank at its Santa Clara, California headquarters before West Coast branches open, noon Eastern time. U.S. President Joe Biden is briefed on the SVB situation by his new chief of staff Jeff Zients and former Fed Vice Chair Lael Brainard, who took over as director of Biden's National Economic Council on Feb. 21, as Yellen testifies for three hours in a contentious congressional hearing. Only one lawmaker asks about SVB. Yellen assures Congress she is monitoring events surrounding "a few banks" and says any bank's financial losses are concerning. She holds a 1 p.m. Eastern virtual meeting with Fed Chair Jerome Powell, FDIC Chair Martin Gruenberg, Michael Hsu, acting Comptroller of the Currency, and Mary Daly, president and CEO of the San Francisco Federal Reserve. At 2:30 p.m., Treasury issues a statement about confidence in regulators and the overall resilience of the U.S. banking system.
Some tech investors start offering cash to prop up their companies, others take to Twitter to push the Biden administration to act.
Late Friday, Treasury officials brief lawmakers; one Republican staffer seeks assurances the plans will not lead to more regulation. The FDIC makes a record withdrawal of $40 billion from the Treasury General Account as it seizes control of Silicon Valley Bank, an amount many times larger than any previous draws.
SATURDAY, MARCH 11 Regulators learn a second bank, New York-based Signature, which had almost a quarter of its deposits from the cryptocurrency sector, is facing similar liquidity problems.
U.S. Treasury staff hold virtual morning meetings, deciding to: 1) Look for a buyer; 2) provide a systemic risk exemption to protect depositors; 3) revamp the terms of a Fed facility to permit more borrowing. Yellen meets again with Powell, Fed Vice Chair for Supervision Michael Barr, and Gruenberg from the FDIC, and they agree to do all three. The rush is on to assure SVB's depositors that they can make payroll on Monday and get ahead of Asian markets opening on Sunday around 6 p.m. ET. Depositors will be "made whole," but the bank's management will be removed and investors will lose their funds.
U.S. officials jump into "hundreds of Zoom calls" and answer emails from anxious lawmakers worried about small businesses in their districts, tech industry executives, and business owners who fear they will have to lay off workers, a White House official says.
Garry Tan, CEO of startup accelerator Y Combinator, fearful of what he calls a potential "extinction level event" in the tech sector, launches a petition signed by more than 3,500 CEOs and founders, appealing directly to Yellen.
Saturday evening, more than 600 Washington VIPs, including administration officials, lawmakers, reporters and editors gather for the annual white-tie Gridiron Dinner. Brainard and a key aide to Yellen both cancel at the last minute.
SUNDAY, MARCH 12 Yellen pre-tapes a nearly 13-minute-long interview with CBS News' "Face the Nation" program at 8:30 a.m. ET on Sunday. Federal officials are working on a "timely" solution, she says, and rules out a bailout. Meanwhile, the FDIC's auction for SVB's assets is not going well, and the pressure is on to finalize the other options before Asian markets open. Two early suitors - PNC Financial Group Inc and Royal Bank of Canada - back away. Without a deal, the Fed and FDIC boards vote unanimously to proceed with plans hammered out over the past two days. Shortly after 6 p.m., New York regulators close Signature Bank.
The Federal, Treasury and the FDIC issue a joint statement outlining plans to protect depositors at Silicon Valley Bank and Signature.
Treasury and White House reach out to members of Congress and their staffs throughout the evening to explain the plan, with discussions continuing into Monday.
MONDAY, MARCH 13 Just after 9 a.m., Biden makes a four-minute statement, pledging to protect depositors and vowing to prevent similar situations by strengthening bank regulations.
The remarks don't soothe markets immediately, but by
Tuesday they have calmed.
TUESDAY, MARCH 14 The Federal Deposit Insurance Corp says its withdrawal of a record $40 billion in U.S. Treasury Funds on Friday as it seized control of Silicon Valley Bank will not affect when the Treasury runs out of operating room under the debt ceiling. The Federal Reserve is considering tougher rules and oversight for midsize banks, according to a source familiar with the matter. A review of the $209-billion bank's failure being conducted by Fed Vice Chair for Supervision Michael Barr could lead to strengthened rules on banks in the $100 billion to $250 billion range.
WEDNESDAY, MARCH 15 The top U.S. markets regulator on Wednesday renews a vow to prosecute any misconduct threatening global markets, saying it had a responsibility to protect market resiliency. "Lest we forget, eight million Americans lost their jobs, millions of families lost their homes, and small businesses across the country folded as a result of the financial crisis of 2008," U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler said. U.S. Senator Elizabeth Warren, pushing tighter regulation, tells CNBC on Wednesday any stress testing of financial institutions needs to be done from an outside entity. European bank stocks slump, with embattled Credit Suisse tumbling as much as 30% to a record low. Europe's bank index has seen more than 120 billion euros evaporate ($127 billion) in value since March 8. U.S. Treasury officials monitor unfolding events around Credit Suisse closely and discuss the issue with global counterparts after a major shareholder ruled out providing new capital.
In the United States, regional banks also fall, including First Republic Bank , Western Alliance Bancorp and PacWest Bancorp . Big U.S. banks such as JPMorgan Chase & Co , Citigroup and Bank of America Corp slide between 2.5% and 6.5%. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Tech execs race to save startups after SVB collapse Credit Suisse leads Europe bank rout in renewed SVB fallout Britain says will bolster financial system after Silicon Valley Bank collapse Short sellers may pocket $2.3 bln from U.S. bank rout over last three days -S3 Partners European banks battered as Credit Suisse drops over 20% SVB says Goldman Sachs was the buyer of portfolio it booked losses on Charles Schwab CEO says company has liquidity, not seeking capital or deals SVB creditors form group ahead of possible bankruptcy - WSJ Private equity giants including Apollo, Blackstone eye SVB loan book- reports Warren urges Powell to recuse from SVB probe, demands answers of ex-bank CEO Signature Bank faced criminal probe ahead of its collapse - Bloomberg News ANALYSIS-U.S. bank loan plan provides Fed rate hike path amid SVB fallout ANALYSIS-Some U.S. banks facing stock rout may need to seek partners ANALYSIS-SVB collapse unleashes Treasury volatility, whiplashing investors GRAPHIC-European bank investors cash in GRAPHIC-The path to the fall of Silicon Valley Bank GRAPHIC-SVB, Signature Bank are first bank failures since 2020 GRAPHIC-Credit Suisse goes off piste GRAPHIC-Credit Suisse revamp BREAKINGVIEWS-SVB proves even smaller banks are too big to fail BREAKINGVIEWS-Bank runs don’t change Fed’s focus on high prices BREAKINGVIEWS-European banks priced for profit dip, not crisis ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Andrea Shalal; Additional reporting by Trevor Hunnicutt; Editing by Heather Timmons, Lincoln Feast and Nick Zieminski)
