How 4 US banks crashed and a fifth one became unstable in just 11 turbulent days
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Investors in the US remain uncertain as four banks collapsed and another one remained struggling in the span of just 11 days. While the collapses happened right next to each other, the reasons behind the failures were unique to each business.
Silvergate Capital Corp. was the first American bank to collapse. The bank failed due to its exposure to the crypto meltdown. The Federal Reserve authorized the Federal Deposit Insurance Corp. (FDIC) to step in and discuss management techniques to walk around a total shutdown of the bank. However, the regulatory measures and the criminal investigations of the Justice Department's fraud unit into the transactions with FTX and Alameda Research kept La Jolla from recovering. No wrongdoings were declared by the authorities but the bank had to sell off assets at a loss to cover the withdrawals of worried customers. On March 8th, Silvergate announced that it would terminate operations and liquidate the bank.
While Silvergate was announcing termination, the Silicon Valley Bank (SVB) made public its plans to sell $2.25 billion of shares and significant investment losses. This stirred the concerns of investors and depositors at Silicon Valley Bank. By the next day, the company shares had sunk 60%. A day later, the bank collapsed into receivership of the FDIC. The regulators could not find a suitable buyer for the business and made plans for a breakup of the bank. However, FDIC extended the bidding process and multiple potential buyers for SVB emerged by Monday. First Citizens BancShares Inc. hopes to strike a deal for SVB, as reported by Bloomberg on Monday.
The next US bank to go under was the Signature Bank, which was also the third largest bank failure in American history. On March 12th, the bank suffered collapse as customers withdrew over 20% of the bankās deposits. What motivated the depositors of Signature Bank to withdraw their funds was the Silvergateās implosion just four days earlier. Federal regulators took the bank into receivership citing how they have lost faith in the leadership of the company. All insured and uninsured customers were given access to their deposits under systemic risk redemption by the regulators. New York Community Bancorp's Flagstar Bank took over the deposits and some loans of the Signature Bank. Now, the Signature Bankās branches will be operating as Flagstar locations.
Credit Suisse Group AG collapsed on Sunday when the Swiss officials made a deal with UBS Group AG for an acquisition of $3.2 billion. The bank aimed to avoid a broader financial crisis with this move. Credit Suisse had a history of 166 years. CEO Ulrich Koerner attempted to save the bank by reaching out to clients who withdrew a large amount of money from the bank in the previous year. But it was not enough to cover for numerous scandals and multibillion-dollar losses.
First Republic is the current victim of customer flight that ruined three of its competing US banks. The estimated value of deposit outflows is currently at $89 billion. Eleven US lenders helped the First Republic Bank gain its footing again with a $30 billion cash infusion last week. The bank caters to the needs of tech elites and wealthy individuals. Whatever measures the management took, the bank kept plunging as multiple credit-rating downgrades keep coming in.
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