The fallout from this month’s banking turmoil — the surprising bank runs and collapses of Silicon Valley Bank and Signature Bank — has been widespread. In its wake, the global banking system has been shaken.
More volatility is in store for the week ahead. But that doesn’t mean this is a repeat of the global financial crisis from 15 years ago. Everyday customers’ deposits are guaranteed and regulators across the globe say the banking system remains healthy.
Credit Suisse and First Republic: Two more banks wobbled through the week. Beleaguered megabank Credit Suisse was taken over by UBS Sunday after it announced last week that it will take up to $53.7 billion in support offered by the Swiss central bank to stay afloat. Meanwhile, First Republic bank received a $30 billion lifeline on Thursday from some of the largest banks in the United States.
Still, First Republic’s lifeline might not be enough to keep it afloat. First Republic shares plunged by about 33% on Friday.
US commercial banks’ profits have been under pressure from deteriorating asset quality, slowing loan growth and rising deposit rates, said Seema Shah, chief global strategist at Principal Asset Management.
But SVB and Signature Bank were unique in that much of their deposit bases were largely from the struggling tech and crypto sectors. These banks also held an unusually large proportion of their customer’s deposits in Treasuries — which had dropped in value as the Fed started hiking interest rates, she said.
First Republic doesn’t have the same problems Silicon Valley Bank did. Long-term treasury bonds made up 55% of all SVB assets and just 15% of First Republic’s.
“Ultimately, investors need to decide if these…
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