The speed at which four banks collapsed – and one continued to struggle – sent investors reeling. Although the incidents occurred within just 11 days, the circumstances that caused them to fail were unique.
Here’s how the corporate turmoil unfolded and how regulators responded, amid fears the crisis could still spread:
silver gate
Silvergate Capital Corp. was the first US bank to fail, due to its exposure to the crisis of the cryptocurrency industry. With permission from the Federal Reserve, the Federal Deposit Insurance Corporation attempted to intervene, discussing with management ways to avoid the shutdown.
But the La Jolla, California-based company has been unable to recover amid scrutiny from regulators and the Justice Department’s fraud unit’s criminal investigation into its dealings with the man. crypto giant FTX and Sam Bankman-Fried’s Alameda Research.
While no wrongdoing has been confirmed, Silvergate’s woes deepened as the bank sold loss-making assets to compensate for withdrawals by fearful customers. It announced plans on March 8 to close operations and liquidate its bank.
Silicon Valley Bank
With the majority of Silvergate’s obituary written down, investors and depositors at SVB Financial Group’s Silicon Valley Bank were ready when the company on March 8 announced plans to sell 2.25 billion dollars in stock – as well as a substantial loss in his portfolio.
The company’s stock fell 60% the next day on the news, and it crashed to FDIC reception the next day. US regulators moved towards a bank split when they failed to find a suitable buyer. But more hopeful news emerged on Monday, as the FDIC expanded its bidding process after receiving “considerable interest” from many potential buyers.
First Citizens BancShares Inc., one of the biggest buyers of failed lenders in the United States, is still hoping to reach a deal to buy out the entirety of Silicon Valley Bank, Bloomberg News reported on Monday. , citing people familiar with the matter.
signature bank
Signature Bank became the third-biggest bank failure in U.S. history on March 12, after a spike in customer withdrawals, totaling about 20% of the company’s deposits.
Silvergate’s collapse four days earlier had customers worried about keeping their deposits at Signature Bank, even though the bank’s exposure to cryptocurrencies was much smaller. Federal regulators said they had lost confidence in the company’s management and that they had put the bank on receivership. Both insured and uninsured clients are allowed access to all of their deposits, under a provision that mining managers call a “systemic risk waiver”.
Signatures Bank deposits and some of its loans were taken over by Flagstar Community Bank of New York Bancorp late Sunday. The acquirer agreed to buy $38 billion in assets, including $25 billion in cash and about $13 billion in loans, from the FDIC. It also took on about $36 billion in liabilities, including $34 billion in deposits. Signature branches will now operate as Flagstar locations.
Credit Suisse
Credit Suisse Group AG fell on Sunday as Swiss officials brokered a deal with UBS Group AG to buy back 3 billion francs ($3.2 billion) in a bid to avoid a broader financial crisis. The only other option being considered is full or partial nationalization.
The end of the 166-year-old Swiss institution follows CEO Ulrich Koerner’s attempt to save the bank by reaching out widely to customers, who have withdrawn unprecedented amounts of money from the bank. last year. The effort was ultimately not enough to combat multiple scandals and billions of dollars in losses in Credit Suisse’s dealings with disgraced financier Lex Greensill and failed investment firm Archegos Capital Management.
On March 9, the U.S. Securities and Exchange Commission queried the bank’s annual report, forcing it to postpone publication. Panic spread following the failure of US regional lenders and the chairman of the bank’s largest shareholder, the National Bank of Saudi Arabia, ruled out further investment in the company. company.
First Republic
First Republic Bank fell victim to the same customer flight that eventually sank three of its US rivals, with an estimate of potential deposit flows that could peg the number at $89 billion. dollars.
Eleven US lenders tried to back the First Bank of the Republic with $30 billion in cash last week. However, the San Francisco-based company, which specializes in catering to the personal banking needs of the tech elite and other wealthy individuals, nonetheless fell to an all-time low amid the pandemic. credit rating downgraded many times.
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon has hatched a new plan to aid the First Republic in converting some or all of 11 banks’ $30 billion in deposits into a capital fund, Bloomberg reported on Monday. , citing people familiar with the situation.
