Plunging regional bank shares
March 14, 2023 - Shares in U.S. regional banks have fallen sharply over fears of deposit flight, as the unexpected collapse of Silicon Valley Bank and Signature Bank prompted investors to dump stocks.
Signs of trouble emerged on Wednesday, March 8, when Silicon Valley Bank (SVB) surprised investors with news that it needed to raise more than $2 billion to shore up its balance sheet.
The 40-year-old bank also had a high percentage of uninsured domestic deposits -- nearly $152 billion, more than 90 per cent of all deposits. By the end of Friday, customers had tried to withdraw $42 billion, prompting California regulators and the Federal Deposit Insurance Corporation (FDIC) to step in and shut down the bank.
Two days later, the New York Department of Financial Services took possession of Signature Bank “to protect depositors.”
Shares in several U.S. regional banks closed sharply lower on Monday (March 13) despite President Joe Biden’s assurance that Washington regulators would do “whatever is needed” to protect depositors.
San Francisco-based First Republic led the sell-off, finishing down 72.9 per cent since the March 8 revelation that SVB was in trouble. Arizona-based Western Alliance Bank was the second-worst performer of the regional banks, closing 63.5 per cent lower since March 8.
If necessary, the FDIC could take over the First Republic, wiping out shareholders and bondholders to protect depositors as it did with SVB and Signature. The FDIC insures up to $250,000 per account, per bank, for depositors.
- Global Financial Stocks Lose $465 Billion on SVB Impact Worry (Bloomberg)
- Shares in US regional banks close sharply lower over fears of deposit flight (Financial Times)
- Regional Banks Slammed by Fear of a Broader Financial Crisis (New York Times)
- Asset total in 2023 bank failures catching up to 2008 (SP Global Market Intelligence)