PremiumThe collapse of the Silicon Valley Bank has rocked the markets, raising concerns that other banks could be facing similar problems. On Friday last week, the regulators took control of SVB – a key lender to startups across the US since the 1980s – after a huge run on deposits left the medium-sized bank unable to stay afloat on its own.
On Sunday, US authorities unveiled sweeping measures to rescue depositors' money at the failed SVB.
Meanwhile, the bank's UK arm will is being acquired by HSBC Holdings Plc, the culmination of a frantic weekend where ministers and bankers explored various ways to avert the SVB unit’s collapse.
Fears about the world banking system spread to Europe on Wednesday as shares in the globally connected Swiss bank Credit Suisse plunged and dragged down other major European lenders in the wake of bank failures in the United States.
At one point, Credit Suisse shares lost more than a quarter of their value, hitting a record low after the bank's biggest shareholder — the Saudi National Bank — told news outlets that it would not put more money into the Swiss lender, which was beset by problems long before the U.S. banks collapsed.
The turmoil prompted an automatic pause in trading of Credit Suisse shares on the Swiss market and sent shares of other European banks tumbling, some by double digits. That fanned new fears about the health of financial institutions following the recent collapse of Silicon Valley Bank and Signature Bank in the U.S.
Speaking Wednesday at a financial conference in the Saudi capital of Riyadh, Credit Suisse Chairman Axel Lehmann defended the bank, saying, “We already took the medicine" to reduce risks.
When asked if he would rule out government assistance in the future, he said: “That’s not a topic. ... We are regulated. We have strong capital ratios, very strong balance sheet. We are all hands on deck, so that’s not a topic whatsoever."
A day earlier, Credit Suisse reported that managers had identified “material weaknesses" in the bank’s internal controls on financial reporting as of the end of last year. That fanned new doubts about the bank’s ability to weather the storm.
Credit Suisse stock dropped about 30%, to about 1.6 Swiss francs ($1.73), before clawing back to a 24% loss at 1.70 francs ($1.83) in late afternoon trading on the SIX stock exchange. At its lowest, the price was down more than 85% from February 2021.
The stock has suffered a long, sustained decline: In 2007, the bank's shares traded at more than 80 francs ($86.71) each.
With concerns about the possibility of more hidden trouble in the banking system, investors were quick to sell bank stocks. (AP)
The Treasury Department is actively reviewing the US financial sector’s exposure to Credit Suisse Group AG after the bank’s stock saw its biggest one-day drop on record, according to people familiar with the matter.
Officials at the Treasury Department are working closely with the Federal Reserve and European regulators, said one of the people, who spoke on condition of anonymity. Spokespersons for the Treasury Department and the Fed declined to comment. (Bloomberg)
UK stocks wiped out year-to-date gains on the back of sharp downfall in banking and commodities shares. Even Chancellor Jeremy Hunt’s budget did little to calm the panic in market which has been riled up after two US banks failure over liquidity risks.
According to Bloomberg report, the FTSE 350 index dropped as much as 3.2% on Wednesday, the most since June as lenders including HSBC Holdings Plc and Barclays Plc plunged with global peers in the wake of turmoil at Credit Suisse Group AG and continued fallout from Silicon Valley Bank’s collapse. Oil and industrial metals slumped, dragging down Shell Plc, BP Plc, Glencore Plc and Rio Tinto Plc.
Hunt’s budget measures which involves energy support for households and added defense spending --- were already priced into the market after being reported earlier by the media.
Major US banks' stock sank on Wednesday tracking a sharp selloff in European banks after Credit Suisse Group AG plunged to record low over contagion fear.
Stocks such as Citigroup Inc. and Goldman Sachs Group Inc -- dropped by more than 4%. The KBW Bank Index plunged by as much as 5.1%, amid a downfall in Bank of America Corp., JPMorgan Chase & Co., Morgan Stanley, and Wells Fargo & Co.
Credit Suisse stock free fall led to over $60 billion market rout in European banks.
In a statement, on Wednesday, S&P Global Ratings lowered its long-term issuer credit rating on First Republic Bank to 'BB+' from 'A-'. The rating agency also lowered the senior unsecured issue rating to 'BB+' and the subordinated and preferred stock issue ratings to 'BB-', and 'B', respectively.
Further, S&P placed all of its ratings on First Republic on CreditWatch with negative implications.
S&P believes the risk of deposit outflows is elevated at First Republic--despite actions by federal regulators. In the wake of recent bank failures due to liquidity issues and the ensuing market stress, the Federal Reserve Board announced on March 12, 2023, certain emergency liquidity measures, including the creation of the Bank Term Funding Program (BTFP) and an easing of terms offered through the discount window.
Swiss bank Credit Suisse has dropped by 24% and touched a record low on Wednesday. The downfall comes after one of the biggest backers Saudi National Bank ruled out the possibility to aid more funds in the lender. Also, Credit Suisse has come under the regulatory radar. While the clients' outflow in their ambit has raised the question of whether Credit Suisse needs government assistance.
As per reports, Credit Suisse stock plunged over fears of contagion from the collapse of two US banks. Also, its annual report for 2022 cited "material weaknesses" in internal controls.
The discomfort around Credit Suisse has even fuelled around $60 billion of rout in European banks.
European stocks gave up the previous session's gains and were back in the red zone on Wednesday as investors turned cautious on banking sector concerns. Apart from the Silicon Valley Bank collapse saga, Credit Suisse shares are tanking after its top shareholder ruled out fresh assistance.
Main indices in Paris and Milan plummeted by more than 3%, while Frankfurt and London dipped by at least 2.5%.
Credit Suisse's share price has nosedived by nearly 24%, while France-based Societe Generale has dived by around 10% roughly.
In an email to SVB UK colleagues, HSBC's CEO said, "we talked about the great potential of this organisation and the UK’s technology and life sciences sector. We’re excited to be working with such a strong team to support their customers."
He has urged SVB UK staff to assure their clients that deposits are safe and loans are protected backed by the strenght and security of HSBC.
Balaji Kridha, Head of Startup launchpad, Deshpande Startup:
It surprised me that people are blaming startups for depositing money with a bank like SVB. In the tech industry and venture capital, SVB has always been the bank of choice, especially with US entities and part of Y-Combinator. To blame startups here was completely wrongheaded.
The current situation highlights the importance of Fed & FDIC providing protections to depositors and raises questions about the health of the banking industry, particularly when it comes to potential systemic risks. It serves as a reminder for startups to diversify where their funds are deposited, with even smaller banks needing to be included in that strategy. Investors should also remain vigilant, as there could still be instability in future. This would help mitigate any ripple effects both on a global and local level.
The massive fallout of Silicon Valley Bank and its repercussions are “extremely unlikely" to spread to Japan, opines Japan's top regional banker.
Renewed worries about a US recession erupted after US bankers collapse, and fading expectations for early rate hikes by the Bank of Japan contributed to a selloff in the stocks of local lenders in recent days, said Tsutomu Yonemoto, chairman of the Regional Banks Association on Wednesday.
The sudden plunge came after bets on a shift in central bank policy - which would lift lending margins - boosted Japan’s financial stocks in recent months.
Amid heightened fears of banking crisis in the United States post SVB collapse, Federal Reserve Governor Michelle Bowman has reaffirmed that "the US banking system remains resilient and on a solid foundation."
He also said the US banking system remains resilient and continues to be on a solid foundation with strong capital and liquidity throughout the system.
"The US banking system remains resilient and on a solid foundation, with strong capital and liquidity throughout the system. The Board continues to carefully monitor developments in financial markets and across the financial system," Bowman said while addressing the Independent Community Bankers of America ICBA Live 2023 Conference on Tuesday (local time).
The Silicon Valley Bank collapsed last week, followed by the fallout of Signature Bank, creating chaos in the market.
European Central Bank policymakers are still leaning towards a half-percentage-point rate hike on Thursday, despite turmoil in the banking sector, as they expect inflation will remain too high in coming years, a source told Reuters.
Investors had begun to doubt the ECB's commitment to another big rate hike this week after the collapse of Silicon Valley Bank (SVB) in the United States sent ripples through global financial markets.
But the source close to the Governing Council said the ECB was unlikely to ditch its plan to raise rates by 50 basis points on March 16 - announced at its last meeting and repeated several times by President Christine Lagarde and her colleagues - because that would damage its credibility.
The source added that formal proposals for the meeting have not yet been distributed but policymakers have seen the new quarterly projections.
The new inflation forecasts for the next two years will be lower than in December but still put price growth well above the central bank's 2% target in 2024 and slightly above it in 2025.
(Reuters)
The spectacular collapse of Silicon Valley Bank might increase trouble for other US lenders, and even bring SoftBank Group Corp. investments under heightened scrutiny. The shaken confidence of the investors might even bring down SoftBank Group Corp's share below Masayoshi Son’s pain point, reported Bloomberg.
The US tech lender's failure has raised concerns among investors over the exposure to start-up firms in the SoftBank Vision Funds. SoftBank shares have plunged 13% in four sessions to below 5,000 yen and are nearing a level that some see as Son’s threshold for announcing a buyback. The SVB crisis has brought the spotlight in private tech investments.
Kiddopia & Mediawrkz, the two step-down subsidiaries of India's gaming and sports media platform, Nazara Tech, had unrestricted access to ₹64 crore held at Silicon Valley Bank, the company said in exchange filing. The ₹60 crore of the total amount held in the bank has been transferred to bank accounts outside of SVB. Whereas, the remaining ₹4 crore was still deposited in SVB accounts for unrestricted operational use.
Moody's Investors Service's outlook cut for the US banking system was a “a terrible overreaction", said the head of one of the world's largest asset managers, State Street Corporation, Ron O’Hanley, in his interview with Bloomberg TV. He also added that regulators had reassured the market following the breakdown of three US banks.
“There were a lot of unique circumstances around the banks in question — both on the asset and liabilities side," State Street Corp. Chief Executive Officer Ron O’Hanley told Bloomberg TV on Wednesday. “I don’t think it’s helpful when rating agencies treat entire sectors the same way."
Notably, Moody's cut its outlook for the US banking system to negative from stable, citing the run on deposits at Silvergate Capital Corp., SVB Financial Group’s Silicon Valley Bank and Signature Bank that led to their collapse.
Union Minister of State for Skill Development & Entrepreneurship and Electronics and IT , Rajeev Chandrasekhar interacted with over 450 startups, owned/co-owned by Indians, Venture Capitalists (VCs), Industry leaders and others stakeholders on the collapse of Silicon Valley Bank through video conferencing from New Delhi on Tueday. The minister assured them that the Narendra Modi government is laser-focused on helping them tide over this crisis. Read full report here
Asset managers including Invesco Ltd and Franklin Resources Inc. added shares of SVB Financial Group in the months before the SVB collapse wiped 60% off its stock value in single day.
The two firms were among the two 10 buyers of the share since September. Other major investors in the collapsed bank were Two Sigma Investments, DE Shaw & Co., Renaissance Technologies LLC and BlackRock Inc., according to data compiled by Bloomberg from fourth quarter and more recent regulatory filings and other fund documents.
Liquidity in the world’s largest bond market is evaporating as the US banking crisis muddies the outlook for the Federal Reserve’s monetary policy.
Bid-ask spreads on two-, 10- and 30-year US government bonds jumped to the highest level in at least in six months on Tuesday, according to data compiled by Bloomberg. The 10-year yield swung in a 34-basis point range on Monday, the biggest gap since the onset of the pandemic in 2020.
“Between late cycle dynamics, an aggressive Fed, strong data and contagion risks, these risks are proving hard to stomach," said Eugene Leow, a senior rates strategist at DBS Bank Ltd. in Singapore. The wider bid-ask spreads reflect elevated volatility that’s rendering market participants cautious, he said.
The deterioration in liquidity signals uncertainty about the Fed’s rate-hike path after the collapse of three US lenders underscored the damage wrought by higher borrowing costs. The volatility risks spreading into other assets that use Treasuries as a benchmark, with traders fearful that a wider US banking crisis may be brewing.
(Bloomberg)
Indian fixed-income and foreign-exchange markets are unlikely to see any major fallout after the collapse of a U.S. lender dented risk sentiment, a senior treasury executive at DBS Bank said on Tuesday.
"We generally have an FX fallout if there is a change based on any country-specific nuances," said Ashhish Vaidya, managing director and head - treasury & markets at DBS Bank India.
"The dollar index is not stretching as the typical risk-off scenario. Unless commercial activity drops across the world, which does not seem to be the case, we may not see any major impact."
The U.S. banking regulators said depositors at Silicon Valley Bank (SVB), which shuttered on Friday, would have access to their funds, easing fears that startups would struggle to pay their employees this week.
(Reuters)
Calling out upon the regulators, ARK Investment Management chief Cathie Wood, said US Regulators should have focused more on the signs of looming failure in the traditional banking system instead of blocking decentralized financial platforms.
“Instead of blocking decentralized, transparent, auditable and well-functioning financial platforms with no central points of failure, regulators should have been focused on the centralized and opaque points of failure looming in the traditional banking system," tweeted Cathie Wood.
Goldman Sachs Group Inc was the acquirer of a bond portfolio that earned losses of $1.8 billion, a transaction that set in motion the failure of SVB, reported Reuters.
Notably, the loss on the portfolio was the main reason behind the technology focused lender's attempt of $2.25 billion stock sale last week using Goldman Sachs as an adviser. The capital raise was thwarted as depositors fled and investors fretted SVB would have needed even more capital.
The portfolio SVB sold to Goldman Sachs on March 8 consisted mostly of U.S. Treasuries and had a book value of $23.97 billion, SVB said. The transaction was carried out "at negotiated prices" and netted the bank $21.45 billion in proceeds, SVB added.
Former Federal Reserve Vice Chair for Supervision Randal Quarles rejected the role of looser rules in Silicon Valley Bank's collapse and said he expects the Fed to raise rates a quarter point next week.
He added that the financial stability concerns surrounding SVB's failures undermine support for a 50 basis-point increase at the Fed’s March 21-22 meeting. He said a smaller move, followed by a policy pause, was the most likely outcome.
Rejecting the claims of the role of Fed's loose rules behind the collapse, he said the changes made to bank regulation during his tenure“had nothing to do" with the SVB collapse.
After hitting 5-week low yesterday, oil prices rose in early Asia trade on Wednesday. The surge in oil price was driven by stronger OPEC outlook on China's demand that helped offset bearish global investor sentiment in the wake of the recent U.S. bank failures.
Brent crude futures climbed 62 cents, or 0.8%, to $78.07 a barrel by 0058 GMT, reported Reuters. US West Texas Intermediate crude futures (WTI) gained 70 cents, or 1.0%, to $72.03 a barrel. On Tuesday, the benchmarks fell more than 4% to a three-month low.
"The oil market has bounced back on its own after the recent sharp losses," Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd, told Reuters. He also added that the fall in the oil prices stood as an advantage for investors looking to hunt for bargains.
After a significant decline in share value across the global market, Asian equities improved on Wednesday amid expectations of the markets exceeding the worst impact of the global fallout from the American banking sector. The Hong Kong and Tokyo markets were led by the financial stocks. South Korea's Kospi jumped by 2% and Australian shares showed nominal gains. Read latest report on global stock markets here.
Charles Schwab has ample liquidity, the chief executive of the bank and brokerage said on Tuesday, moving to allay concerns about a "doomsday scenario" that has weighed broadly on bank stocks after the failure of two U.S. lenders since Friday.
"We have not raised capital and we are not in the market at this point for M&A transactions," Walt Bettinger, CEO of Charles Schwab, told Reuters in an interview.
The firm had seen an influx of $4 billion in assets to its parent company on Friday as clients moved assets to Schwab from other firms, Bettinger said.
Schwab on Monday reported that total client assets had slid to $7.38 trillion in February, down 4% compared with a year ago.
Bettinger said Schwab was comfortable with the assets on its bank portfolio, which is separate from its brokerage business. He contrasted it with the portfolios of other companies that had run into trouble.'
(Reuters)
The collapse of Silicon Valley Bank has emerged as an opportunity for other well established banks of America. Post the SVB demise, Bank of America Corp. mopped up more than $15 billion in new deposits in a matter of days, reported Bloomberg. The bank has emerged as the winner from the situation, for sure. To deal with the market fear of an expanding banking crisis, depositors are seeking refuge in the firms that are still considered as too big to fail. The money flowing into the second-largest US bank was described by people with direct knowledge of the matter, who asked not to be identified as the information isn’t public.
Way before its collapse, Signature Bank came under the scanner of US prosecutors, who were investigating Signature Bank's association with crypto clients, reported Bloomberg News citing people familiar with the matter.
U.S. Justice Department investigators in Washington and Manhattan were examining whether the now-collapsed bank took mandatory step to identify potential money laundering by its clients. The report also said the Securities and Exchange Commission (SEC) was also scruitinising the bank.
After the collapse of Silicon Valley Bank and its induced chain reaction across the banking sector, Federal Reserve is planning to come up with tougher rules and oversight for midsize banks similar in size to SVB, reported Reuters citing its sources.
Notably, the bank's collapse has sparked fears across the financial system of a fresh bank crisis. It also drove government to take firm measures to reassure depositors and backstop the system, and set off debate about reversing previous rule easing for regional banks.
Now, 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, the source told Reuters. Read latest report on SVB bank crisis here
Hedge fund Citadel said on Tuesday it bought a 5.3% stake in Western Alliance Bancorporation , sending a strong signal of confidence as the company was swept up in growing fears of a broader financial crisis after two other banks were seized.
Western Alliance's share price, which had tumbled on Monday, jumped as much as 46% at midday after an initial halt in trading.
Citadel, run by billionaire Ken Griffin, earned $16 billion in profits for investors last year and its trades are closely watched by markets for trends. Last year's returns made Citadel the most successful hedge fund ever.
Western Alliance was one of several banks caught in a crippling sell-off which began last week after regulators shut down startup-focused bank SVB Financial Group, triggering worries of a contagion that rippled across financial markets. Signature Bank was also shut down by regulators.
US stock soared as traders wager the worst of the banking sector turmoil has passed, while Treasury yields climbed after the latest inflation reading cemented bets for a Federal Reserve rate hike next week.
The S&P 500 advanced 2.0%, the biggest one-day advance since early January, as regional bank shares bounced back from two days of frantic selling. The policy-sensitive Nasdaq 100 also rose more than 2%.
The two-year Treasury yield climbed — following a three-day swoon that was the biggest in decades amid the tumult — after data showed inflation remained elevated in February. Swaps traders now expect the Fed to lift rates by a quarter percentage point. Odds of an increase had slipped to nearly 50-50 on Monday. The dollar was little changed versus major peers.
US consumer prices rose 0.4% in February, meeting economists’ forecast. The closely watched core CPI number — which excludes food and energy — increased 0.5%, just ahead of the median estimate of 0.4%.
Credit Suisse acknowledged Tuesday "material weaknesses" in its internal controls as the scandal-hit Swiss bank released its annual report, which was delayed following queries from US regulators regarding its books.
Credit Suisse was supposed to publish its annual report last week but it postponed the release after a last-minute call from the US Securities and Exchange Commission over revisions made to cash-flow statements for 2019 and 2020.
The bank's report said that its "internal control over financial reporting was not effective" for 2021 and 2022.
"The material weaknesses that have been identified relate to the failure to design and maintain an effective risk assessment process to identify and analyse the risk of material misstatements in its financial statements," the report said.
Signature Bank was seized by the government Sunday after regulators lost faith in management, according to New York officials.
“The bank failed to provide reliable and consistent data, creating a significant crisis of confidence in the bank’s leadership," a spokesperson for the state’s Department of Financial Services said in an emailed statement Tuesday. “The decision to take possession of the bank and hand it over to the FDIC was based on the current status of the bank and its ability to do business in a safe and sound manner on Monday."
After the DFS put Signature into receivership, the Federal Deposit Insurance Corp. took over the institution and set up a bridge bank to serve clients. The collapse followed a surge in customer withdrawals on Friday that totaled about 20% of the company’s deposits, according to a person familiar with the matter.
Another market meltdown, and another costly lesson for ESG.
After being caught on the wrong side of Vladimir Putin’s war in Ukraine and the Adani scandal, hundreds of ESG fund managers are now dealing with the sting of having misjudged Silicon Valley Bank.
About 915 funds registered under European Union regulations as either “promoting" ESG or declaring it as their “objective" are exposed — directly or indirectly — to the now-collapsed bank, according to data compiled by Bloomberg.
For ESG investors, SVB appeared to tick several boxes. The bank was a big lender to renewable energy companies, a favorite among ESG managers on the lookout for low carbon footprints. But when it came to governance risks, fund managers seem to have been less attentive.
Oil prices fell about 1% to a five-week low on Tuesday as the collapse of Silicon Valley Bank, a U.S. bank, sparked fears of a fresh financial crisis that could reduce future oil demand.
Brent futures were down 51 cents, or 0.6%, to $80.26 a barrel by 11:36 a.m. EDT (1536 GMT), while U.S. West Texas Intermediate (WTI) crude fell 56 cents, or 0.8%, to $74.24.
That puts Brent on track for its lowest close since Feb. 3 and WTI on track for its lowest close since Feb. 22.
Shockwaves from Silicon Valley Bank's collapse triggered big moves in bank shares on Tuesday as investors fretted over the financial health of some lenders, in spite of assurances from U.S. President Joe Biden and other global policymakers.
The Federal Deposit Insurance Corp made a record withdrawal of $40 billion on Friday as it scrambled for resources to take over failing Silicon Valley Bank that same day, government data shows, a development that could have implications for how soon the Treasury runs out of operating room under the debt ceiling.
The FDIC withdrawal from the Treasury General Account was many times larger than any previous largest draws, according to data from the Daily Treasury Statement for March 10 released late on Monday.
Combined with about $13 billion of other federal agency withdrawals on Friday, that left Treasury with just over $208 billion in operating funds at the TGA, which is held at the Federal Reserve. That was down by more than $100 billion from Wednesday's TGA balance, reported by the Fed on Thursday.
Signature Bank was sued in a proposed class action by an investor who claims the bank’s managers made misleading statements that led to losses when it was placed into receivership on Sunday.
Matthew Schaeffer said he bought call options and was “economically damaged" by the bank’s failure, according to a complaint filed in federal court in Brooklyn, New York, on Tuesday.
The suit claims that the bank violated federal securities law and seeks unspecified damages. (Bloomberg)
Moody's Investors Service on Tuesday revised its outlook on the U.S. banking system to "negative" from "stable", citing heightened risks for the sector after the rapid unraveling of SVB Financial Group fueled fears of contagion.
Bank runs at Silicon Valley Bank, Silvergate Capital Corp and Signature Bank have deteriorated the operating environment for the sector that is now battling a crisis of confidence, both from investors and depositors, the ratings agency said.
Lenders that had "substantial" unrealized securities losses and uninsured deposits may be hurt more as customers look for safer alternatives to park their funds.
Moody's also said it was expecting the Federal Reserve to continue tightening monetary policy, in contrast to some others who are expecting the bank collapses this month to reshape the trajectory for interest rate hikes. (Reuters)
A class action lawsuit is being filed against the parent company of Silicon Valley Bank, its CEO and its chief financial officer, saying that company didn't disclose the risks that future interest rate increases would have on its business.
The lawsuit against SVB Financial Group, CEO Greg Becker and CFO Daniel Beck was filed in the U.S. district court for the Northern district of California. It is looking for unspecified damages to be awarded to those who invested in SVB between June 16, 2021 and March 10, 2023.
The lawsuit from shareholders led by Chandra Vanipenta says some quarterly and annual financial reports from SVB didn't fully account for warnings from the Federal Reserve about interest rate hikes.
In particular, the lawsuit said that annual reports for 2020 through 2022, “understated the risks posed to the company by not disclosing that likely interest rate hikes, as outlined by the Fed, had the potential to cause irrevocable damage to the company," the lawsuit stated. (AP)
US and European stock markets rebounded on Tuesday as easing inflation data in the United States offset fears over the health of the banking system.
Shares of banks recovered after markets were rocked earlier this week by the collapse of two US regional lenders, which forced authorities to launch measures aimed at preventing contagion across the sector.
The markets bounced as the turmoil changed the views of investors about the likelihood of another interest rate hike next week by the US Federal Reserve as the central bank battles inflation.
Prior to the implosions of Silicon Valley Bank and Signature Bank, markets were concerned that the Fed could tip the economy into recession by stepping up its monetary tightening campaign.
Regional US bank stocks rallied on Tuesday, clawing back some losses from the selloff seen in the wake of Silicon Valley Bank’s collapse, as concerns about wider contagion in the financial system eased.
First Republic Bank jumped as much as 63% for its sharpest intraday gain ever, following a record Monday drop, while PacWest Bancorp surged 64% and Western Alliance Bancorp rose 53%. Bigger lenders such as Bank of America Corp. and Citigroup Inc. also advanced. Meanwhile, Charles Schwab Corp. rallied as much as 18%.
While Tuesday morning’s bounce is helping stocks pare the recent carnage, they’re still far below levels from last week. First Republic would need a 268% rally from Monday’s close to reach its closing level from Wednesday, and PacWest would need to jump 174%.
The House Financial Services Committee chairman on Tuesday urged confidence in the nation's banking system, saying the Federal Reserve and the Federal Deposit Insurance Corporation are acting within the law after the collapse of two U.S. banks raised concerns about the banking sector and roiled world markets.
"The Fed is doing what the Fed is supposed to do. The FDIC is doing what the FDIC is supposed to do in conformance with the law," Representative Patrick McHenry told CNBC, adding Americans should "have confidence in their financial system."
He also said he spoke with FDIC Chairman martin Gruenberg Monday night and was assured that the financial regulator "is ready, willing and able to take any willing and capable buyer" of failed banks.
Wall Street's main indexes opened higher on Tuesday after consumer prices in the world's largest economy grew in line with expectations, bolstering bets of a small interest rate hike by the Federal Reserve at its next meeting.
The Dow Jones Industrial Average rose 236.15 points, or 0.74%, at the open to 32,055.29.
The S&P 500 opened higher by 38.25 points, or 0.99%, at 3,894.01, while the Nasdaq Composite gained 168.89 points, or 1.51%, to 11,357.74 at the opening bell.
Oil prices fell more than $2 a barrel on Tuesday to their sessions lows, extending the previous day's slide, as the collapse of Silicon Valley Bank rattled equities markets and sparked fears of a fresh financial crisis.
Brent crude futures were down $1.11 or 1.3% to $79.66 a barrel by 1256 GMT, having earlier touched a low of $78.76. U.S. West Texas Intermediate crude futures (WTI) were down $1.24 or 1.6% to $73.56 a barrel, off a low of $72.69.
On Monday, Brent and WTI fell to their lowest since early January and December respectively. Oil prices dropped alongside a continued slide in equities markets. (Reuters)
Wall Street looked set to open higher on Tuesday after consumer prices in the world's largest economy rose in line with expectations, bolstering bets of a smaller interest rate hike by the Federal Reserve at its next meeting.
Data showed that U.S. Consumer Price Index (CPI) rose 0.4% in February versus 0.5% a month ago, while on a yearly basis, it rose 6.0% last month compared with 6.4% the previous month.
The yield on two-year Treasury notes, which best reflect interest rate expectations, tumbled below the 4% mark on Monday and is currently at 4.26%.
Regional bank stocks rebounded in premarket trading. First Republic Bank jumped 59%, a day after the mid-cap lender's executive chair, Jim Herbert, told CNBC the bank has been able to meet withdrawal demands with additional funding from JPMorgan Chase & Co.
Big U.S. banks, including JPMorgan Chase & Co, Citigroup and Wells Fargo, gained between 1.2% and 3.4% after losing ground in the previous session.
Shares of ride-hailing companies Uber Technologies Inc and Lyft Inc rose 6.4% and 6%, respectively, after a California state court revived a ballot measure allowing app-based services to treat drivers as independent contractors rather than employees. (Reuters)
Treasuries swung to a loss Tuesday, a sign of traders’ heightened sensitivity to news on the health of the banking system ahead of key inflation data that may determine the Federal Reserve’s next move.
Two-year yields took a huge round trip, initially climbing to 4.19%, then plunging to 3.82% before surging again to 4.27%. That comes as markets resume bets on a potential Fed interest-rate hike next week, having briefly erased all tightening wagers on Monday.
The sharp moves follow the biggest drop in the two-year yield since 1982 on Monday, after the failure of Silicon Valley Bank and other US lenders. Nervousness was reignited Tuesday by Credit Suisse Group AG identifying “material weaknesses" in its reporting procedures, leaving the risk of contagion in investors’ minds.
US annual consumer inflation eased in line with expectations to 6.0% in February but remains elevated, according to government data released on Tuesday, adding pressure to the Federal Reserve as it mulls further rate hikes to cool prices at its next meeting.
US stock index futures extended gains amid a moderation in February's consumer prices. At 8:32 am ET, Dow e-minis were up 253 points, or 0.79%, S&P 500 e-minis were up 35.5 points, or 0.92%, and Nasdaq 100 e-minis were up 100.5 points, or 0.84%.
Traders' bets that the US Fed will hold rates at the current level at its March meeting stayed at 23%, while bets of a 25 basis point rate hike stood at 77% earlier.
Euro area government bond yields rose on Tuesday, following sharp drops the previous day as investors weighed the impact of Silicon Valley Bank's (SVB) collapse on the outlook for European Central Bank policy.
Germany's 2-year yield was down by as much as 27 basis points (bps) to 2.425% in early trade, its lowest since Jan. 19. It later pared those gains, leaving the yield up 9 bps at 2.789%.
The 2-year yield, which is highly sensitive to ECB interest rate expectations, stood above 3.3% last week.
Apollo Global Management Inc. and Blackstone Inc. have expressed interest in snapping up a book of loans held by Silicon Valley Bank, the California lender seized by federal regulators last week, people with knowledge of the matter said.
Apollo and Blackstone, two of the world’s largest alternative asset managers, are among investors looking to buy pieces of Silicon Valley Bank, according to the people, who asked not to be identified discussing confidential information.
The bank had $73.6 billion of loans as of Dec. 31, 2022. The size of the loan book Apollo and Blackstone are interested in couldn’t immediately be determined. Blackstone is also looking at other assets it may purchase from the bank, one of the people said, reported Bloomberg.
The IT ministry will take up woes of Indian startups impacted by the Silicon Valley Bank collapse with the finance ministry to help them navigate through the crisis and address the immediate liquidity crunch they are facing, Union Minister Rajeev Chandrasekhar said on Tuesday.
The Minister of State for Electronics and IT during interactions with startups asked them to engage with the Indian banking system, which has been very robust and assured them of resolving teething issues they may face.
Though startups and venture capitalists said that the US government authorities have assured of returning full money to the depositors, there is no clarity on the timelines, which will lead to a liquidity crunch in the firms that have been impacted by the SVB collapse, according to the minister. (Read more)
The dollar edged higher in calmer trading on Tuesday, after tumbling on Monday following the collapse of Silicon Valley Bank (SVB).
Tuesday's consumer price index (CPI) figures, due out at 8.30 a.m. ET (1230 GMT), have the potential to drive further volatility in global markets. They come a day after fears of a potential banking crisis caused traders to rapidly scale down their expectations for Federal Reserve rate hikes.
The euro was last 0.08% lower at $1.072 as the greenback bounced. It hit a one-month high of $1.075 on Monday and rose 0.85% across the session.
The dollar was up 0.61% to 134.02 yen , reversing some of Monday's 1.38% slide.
European markets were mixed Tuesday after a broad retreat in Asia as investors watched to see what’s next following the second- and third-largest bank failures in U.S. history.
Bank shares in Europe steadied, showing only modest losses. The STOXX Banks index comprising 21 leading European lenders dipped 0.8%, following steep plunges Monday that had some banks down more than 10% in intraday trading.
Bank shares stabilized following statements late Monday by the head of the group of finance ministers for the 20-country eurozone, Paschal Donohoe, that Europe had “no direct exposure" to Silicon Valley Bank in the U.S.
On Wall Street, the future for the S&P 500 was down 0.15%, while that for the Dow Jones Industrial Average was off 0.3%. On Monday, the S&P 500 dipped 0.2% and the Dow industrials fell 0.3%.
In Asian trading Tuesday, Japan's benchmark Nikkei 225 dropped 2.2% to finish at 27,222.04, extending losses from the day before.
Australia's S&P/ASX 200 dipped 1.4% to 7,008.90. South Korea's Kospi fell 2.6% to 2,348.97. Hong Kong's Hang Seng fell 2.3% to 19,247.96. The Shanghai Composite declined 0.7% to 3,245.31.
Treasury yields climbed after epic declines and US equity futures rose on Tuesday as investors await inflation data that may upend bets that the Federal Reserve is done tightening.
The yield on the two-year Treasury — the most sensitive to interest rates — climbed about 25 basis points to 4.25%, still more than 70 basis points lower than this time last week. Plunging rates captured Wall Street’s attention yesterday, when the yield dropped more than a half-percentage point in the biggest move since the 1980s. The 10-year yield rose four basis points to 3.60%, while a gauge of the dollar snapped three days of losses.
Futures on the S&P 500 and Nasdaq 100 rose about 0.4% as regional banking stocks rallied in premarket trading. First Republic Bank, whose shares tumbled by a record 62% on Monday, jumped as much as 20%. Among larger lenders, Wells Fargo & Co. and Bank of America Corp. gained more than 3%.
Gold prices eased on Tuesday, pausing their sharp rally driven by the U.S. banking crisis, as the dollar rebounded, while traders positioned for inflation data that could also influence the Federal Reserve's interest rate strategy.
Spot gold was down 0.6% at $1,902.40 per ounce, as of 1057 GMT. U.S. gold futures fell 0.5% to $1,907.20.
Bullion prices rallied more than 2% in the previous two sessions as investors sought cover after the collapse of Silicon Valley Bank (SVB) spooked the market.
The dollar index was up 0.2%, making greenback-priced bullion less attractive for buyers holding other currencies. (Reuters)
HSBC Holdings Plc is planning to inject £2 billion ($2.4 billion) of liquidity into Silicon Valley Bank’s UK division, a move capping a frenzied weekend of talks that saw Europe’s largest lender take ownership of the stricken subsidiary.
Chief Executive Officer Noel Quinn and Ian Stuart, the head of HSBC UK, told London tech investors on a call Monday that the bank would commit billions of pounds to ensure that business-as-usual continued at SVB UK after it bought the unit for £1.
HSBC’s UK-based ring-fenced subsidiary, which is taking over the tech-focused lender, said in a statement that the deal will be funded from existing resources. Quinn described the acquisition as making “strategic sense" and said it would improve the bank’s standing in the technology and life-sciences sectors.
The Indian rupee posted its worst performance against the dollar in five weeks on Tuesday, as fears of contagion from the collapse of Silicon Valley Bank (SVB) weighed on risk sentiment ahead of a key U.S. inflation data.
The rupee ended down 0.44% at 82.49 per dollar, marking its biggest percentage drop since February 6.
Traders were adding long USD/INR positions ahead of the U.S. inflation data that could influence the Federal Reserve's monetary policy decision next week.
Credit Suisse Group AG isn’t at risk from the collapse of Silicon Valley Bank, Chief Executive Officer Ulrich Koerner said Tuesday, after shares of the Swiss lender hit fresh lows this week.
“Our credit exposure to SVB in particular is not material," Koerner said at the Morgan Stanley European Financials Conference.
Credit Suisse stock has lost almost a fifth of its value in the past four trading days, as the failure of three regional US lenders prompted concerns about banks’ vulnerability to rising interest rates. Silicon Valley Bank’s seizure Friday, the biggest US bank failure since the financial crisis, was precipitated by fleeing depositors and sent shock waves across the global financial system.
As a systemically important bank, Credit Suisse follows “materially different standards" in terms of capital strength, funding and liquidity, Koerner said. He said the lender had CET1 capital ratio of 14.1% in the fourth quarter and a liquidity coverage ratio of 144% that has since increased.
Global shares slid on Tuesday as a brewing U.S. banking crisis prompted investors to downgrade their expectations for interest rate hikes, even ahead of key inflation data later in the day.
In under a week, three U.S. banks have collapsed. It has been the failure of technology-sector lender Silicon Valley Bank (SVB) that has rattled investor confidence and triggered a rush into safe-haven assets like bonds and gold.
Banking stocks around the world have shed hundreds of billions of dollars in value in a matter of days, while the government bond market has seen one of its biggest rallies in decades.
The MSCI All-World index was down 0.5% on the day, largely due to steep declines across Asian equity markets, while in Europe shares entered a third day of declines, down 0.1%.
Short-dated U.S. Treasury yields rose 14 basis points to around 4.17%, but given that on Monday they posted their largest one-day drop since 1987, the rise on Tuesday still left yields at their lowest in six months. (Reuters)
Lenders in the Asia Pacific region are likely to see a limited impact of U.S. bank failures due to their stable funding sources and ample liquidity, Moody's Investors Service said on Tuesday.
Banks in the region, including China, Japan, Taiwan, India, Korea, Singapore, among others are "mostly funded with customer deposits, while their market borrowings are modest at about 16% of their total assets on average," the global ratings agency said in a note.
"Their business depositors are well diversified across different sectors, with no rated bank in the region being heavily exposed to technology companies."
U.S. state regulators closed New York-based Signature Bank on Sunday, the third largest failure in the country's banking history, two days after authorities shuttered Silicon Valley Bank, following mass withdrawals of customer deposits.
The dollar rose in somewhat calmer trading on Tuesday, after tumbling on Monday following the collapse of Silicon Valley Bank (SVB), as investors waited for the release of U.S. consumer inflation data later in the day.
Tuesday's consumer price index (CPI) figures have the potential to drive further volatility in global markets, coming a day after fears of a potential banking crisis caused traders to rapidly scale down their expectations for Federal Reserve rate hikes.
The euro was last 0.36% lower at $1.069 as the greenback bounced. It hit a one-month high of $1.075 on Monday and rose 0.85% across the session.
The dollar was up 0.79% to 134.25 yen, reversing some of Monday's 1.4% slide. (Reuters)
The blame game is on for who caused Silicon Valley Bank’s collapse, and the tech sector is pointing the finger at SVB CEO Greg Becker for allowing his company to go down in history as the second-biggest US banking failure on record.
One Silicon Valley Bank employee, who requested anonymity to speak candidly, was dumbfounded by how Becker publicly acknowledged the extent of the bank’s financial troubles before privately lining up the necessary financial support to ride out the storm, reported CNN.
This set the stage for the panic that ensued as customers scrambled to pull their money.
“That was absolutely idiotic," the employee, who works on the asset management side of Silicon Valley Bank, told CNN in an interview. “They were being very transparent. It’s the exact opposite of what you’d normally see in a scandal. But their transparency and forthright-ness did them in."
European stock markets mostly fell at the open on Tuesday, as investors fretted over contagion fears after the collapse of two US lenders.
The failure of Silicon Valley Bank (SVB) on Friday, followed by Signature Bank days later, has sent shockwaves across trading floors worldwide.
In initial deals, London's benchmark FTSE 100 index fell 0.6 percent to 7,503.85 points compared with Monday's close.
HSBC topped the fallers board, sliding 2.5 percent one day after it agreed to buy SVB's UK division.
In the eurozone, the Paris CAC 40 index retreated 0.2 percent to 7,001.31, with Credit Agricole dipping 1.4 percent in value.
Frankfurt's DAX, however, rose nearly 0.1 percent to 14,968.48, but Commerzbank dipped 0.8 percent. (AFP)
After the demise of Silicon Valley Bank, other large banks of the US like JPMorgan Chase & Co and Citigroup Inc are flooded with requests from lenders for cash transfer, reported Reuters citing Financial Times report.
Other US banks are trying to accommodate these customers even by taking extra steps to speed up the normal sign-up process. The crisis has also led to fall in shares of regional banks of the USA such as First Republic Bank , Western Alliance and KeyCorp.
Global multi-line insurance company, Assicurazioni Generali SpA, has no exposure to the collapsed Silicon Valley Bank, said the company's Chief Financial Officer, Cristiano Borean in post-results conference call.
Gold prices slipped from their five week high mark on Tuesday, but continued to hover above $1900 level, amid the expectations of Fed rate pause due to Silicon Valley Bank collapse.
Spot gold was down 0.1% at $1,910.80 per ounce, as of 0726 GMT, after rising more than 2% on Monday to hit its highest since Feb. 3. U.S. gold futures also fell 0.1% to $1,915.00.
"Safe-haven flows in the aftermath of the SVB's fallout, along with a pullback in hawkish rate expectations, have been supportive of gold prices' upside over the past few days," Yeap Jun Rong, a market analyst, told Reuters.
Digital Currency Group, a venture capital currency focusing on digital currency market, is looking for a new banking partners for portfolio companies after the collapse of Silicon Valley Bank, Signature Bank and Silvergate, reported Reuters citing Coindesk.
The market weakening led by energy stocks resulted in the Australian shares to end on a lower note on Tuesday. The fears of the collapse of a US tech-focused lender led investors to put off bets on further rate hikes by the local central bank in April.
The S&P/ASX 200 index ended 1.4% lower at 7,008.90, extending its rout into the third straight day. Akin to US market sentiment of US Fed putting a break on its aggressive rate hike cycle, investors were expecting the Reserve Bank of Australia (RBA) to leave the cash rate unchanged at 3.6%. The expectation is a complete reversal in sentiment from just a week ago when they wagered rates to peak at 4.2%. However, the domestic economic data will guide the central bank's moves on interest rates not the SVB collapse, analysts told Reuters.
Tokyo stocks ended sharply lower Tuesday, as investors remain risk averse despite US attempts to settle nerves after the spectacular collapse of Silicon Valley Bank.
The benchmark Nikkei 225 index was down 2.19 percent, or 610.92 points, to close at 27,222.04, while the broader Topix index plunged 2.67 percent, or 53.45 points, to 1,947.54. The dollar stood at 133.33 yen, against 133.22 yen in New York on Monday.
The collapse of Silicon Valley Bank on Friday, followed by Signature Bank days later, forced US authorities to immediately pledge support for other lenders and depositors.
The demise of SVB, which specialised in venture-capital financing mainly in the tech sector, was largely the result of the Fed's sharp interest rate hikes aimed at quelling inflation, which hit securities hard.
The SVB debacle has "brought on the highest volatile market conditions of 2023 so far", Stephen Innes of SPI Asset Management said in a note.
The effect reverberated throughout Japan's financial sector, too, prompting banking shares to tumble.
Sumitomo Mitsui Financial Group nosedived 7.56 percent to 5,240 yen and Daiichi Life Holdings tanked 7.28 percent to 2,444 yen.
(AFP)
The dollar hovered near a multi-week low on Tuesday amid fears of the transformation of expanding SVB impact into a systematic crisis. The collapse of the US tech-focused lender has left traders anticipating whether the Federal Reserve's rate hike has come to a halt or not. Market continued to remain under chaos on the second day after the collapse of Silicon Valley Bank(SVB). However, President Joe Biden's assurance provided some comfort to the banking system.
The US Dollar rose to an intraday peak of 134.03 yen and was last 0.48% higher at 133.87, reversing some of Monday's 1.4% slide, reported Reuters.
Similarly, the dollar pushed the euro and sterling some distance away from their one-month highs hit on Monday.
Japanese policymakers on Tuesday played down the risk of the economy taking a hit from the collapse of U.S. lender Silicon Valley Bank, even as fears of a contagion hit financial stocks and sent domestic share prices tumbling.
Speaking at a regular news conference, Economy Minister Shigeyuki Goto said the government was closely watching for any potential fallout on Japan's economy, but did not expect a major impact from the U.S. lender's collapse for now.
Finance Minister Shunichi Suzuki echoed the view, saying he saw the possibility of Japan's financial system being jolted by Silicon Valley Bank's collapse as small.
"We're seeing some risk-aversive moves in the market. But Japan's financial system is stable," Suzuki said at a separate news conference.
Japanese financial shares on Tuesday were set for their biggest plunge since the onset of the COVID-19 pandemic, as investors focused on the potential risk to commercial banks from their huge U.S. Treasury holdings.
(Reuters)
Asset managers including Invesco Ltd. and Franklin Resources Inc. added shares of SVB Financial Group in the months before the collapse of Silicon Valley Bank wiped 60% off its stock value in a single day.
The firms, together with Two Sigma Investments, DE Shaw & Co., Renaissance Technologies LLC and BlackRock Inc., were among the top 10 buyers of the shares since September, according to data compiled by Bloomberg from fourth quarter and more recent regulatory filings and other fund documents.
Silicon Valley Bank’s technology startup clients and investors fled last week, spurring the second-biggest bank failure in US history. The swift collapse of the lender sent ripples through the tech and finance industries, prompting the government to protect client deposits.
SVB has lured some of the world’s biggest asset managers, ranging from passive to active investors and hedge funds. Franklin Resources’s nearly $7.2 billion Franklin Mutual Shares Fund owned $134 million worth of SVB shares at the end of January, according to a document. Several of the firm’s funds also had small exposure to debt of Silicon Valley Bank, failed Signature Bank and Silvergate as of March 9, according to a recent update posted on its website.
(Bloomberg)
The unprecedented collapse of Silicon Valley Bank(SVB) last week could end the Federal Reserve's current cycle of interest rate hikes sooner than expected, says analysts.
According to AFP, the traders and analysts who were expecting FED to raise interest rates in the coming months have now reversed their expectations. Many of them are saying the US central bank will hold its benchmark rate next week amid the chaos erupted due to the demise of Silicon Valley Bank. The SVB collapse has wiped out more than $465 billion in two days across global financial stock markets. Read full story here.
In the wake of the Silicon Valley Bank collapse, Moody's Investors Services placed First Republic Bank and five other US lenders on review for downgrade. The downgrade in status is the latest sign signalling the depleting health of regional financial firms following the collapse of Silicon Valley Bank.
In addition to SVB, the credit rating copany downgraded the status of Western Alliance Bancorp., Intrust Financial Corp., UMB Financial Corp., Zions Bancorp. and Comerica Inc.
The move comes after US bank stocks were pummeled, even as the government rescued SVB’s depositors and unveiled a new lending facility to support lenders’ financing and prevent more bank runs. Moody’s also downgraded Signature Bank and withdrew its credit rating, following the lender’s closure over the weekend. Read Full report here.
Some U.S. regional banks are under pressure after the collapse of two lenders within days, with industry executives and advisers saying they could be forced to seek saviors if a rout in their stocks doesn't let up.
U.S. regulators announced extraordinary measures on Sunday following the collapse of SVB Financial Group and Signature Bank, offering a safety net to banks pressured by fleeing depositors. On Monday, President Joe Biden vowed to take action to ensure the safety of the banking system.
But the intervention did little to prop up the banks' shares, which slumped on Monday, posing a major impediment to growing their businesses and getting funding.
"If this continues to escalate you will have a liquidity drain from the mid to small banks," said David Ellison, a portfolio manager at Hennessy Funds, which had a position in Signature Bank.
Raising private capital could help inspire confidence again in their stocks. Possible outcomes for under-pressure regional banks could see a stronger rival take over a weaker, or cash infusions from investors such as private equity, the industry sources said.
Over the weekend, some private equity firms had studied the possibility of an investment in banks whose shares plummeted such as First Republic Bank and PacWest Bancorp , according to two industry sources with knowledge of the matter. They did not go ahead as the investors wanted to see what the government would do to alleviate pressure on the banking sector, the sources said.
(Reuters)
As the Silicon Valley Bank collapse has forced the investors to cut their exposure to lenders, global financial stocks have lost around $464 billion in market value in two days.
According to Bloomberg, the loss widened on Tuesday with the MSCI Asia Pacific Financials Index plumetting by 2.7% to the lowest since Nov. 29. Mitsubishi UFJ Financial Group Inc. slid as much as 8.3% in Japan, while South Korea’s Hana Financial Group Inc. fell 4.7% and Australia’s ANZ Group Holdings Ltd. lost 2.8%.
Market experts worry that the SVB-induced worry can impact the investments of financial firms in bonds and other instruments on the SVB-induced worry. Treasury yields plunged Monday amid expectations the Federal Reserve will hold off raising rates due to turmoil in the banking system.
As the SVB crisis continues to expand, oil prices fell more than $1 on Tuesday. The fall extended the previous day's slide. The widening impact of SVB demise has sparked fears about a fresh financial crisis.
Brent crude futures were down 87 cents, or 1.1%, at $79.90 a barrel at 0345 GMT. U.S. West Texas Intermediate crude futures (WTI) dropped 85 cents, or 1.1%, to $73.93 a barrel, reported Reuters. A day ago, Brent price crashed to its lowest level since early days of 2023, while WTI tumbled to its lowest since December.
The unprecedented shutdown of SVB Financial triggered concerns about risks to other banks due to the US Federal Reserve's share interest rate hike over the last year. It also forced the investors to wonder whether the US Fed might opt for a dovish stance in the coming time or not.
The Indian currency is expected to decline against the U.S. dollar on Tuesday, tracking losses in Asian equities and currencies as the ripple effect of Silicon Valley Bank collapse expand across the global market. Rupee fell 4 paise to 82.27 against US dollar in early trade on Tuesday.
The spillover impact of SVB demise was visible on most of Asian currencies which dropped between 0.2% to 0.4%. Shares in South Korea, Japan and Australia were all down about 2%.
Futures indicate that the Fed rate could peak at around 4.84% in May and cut rates from then on. The Fed policy rate is expected to be below 4% by December, marking a significant shift from the 5.64% peak prior to the collapse of SVB.
Private Equity giant, Apollo Global Management, is reportedly interested in buying a part of loans held by the Silicon Valley Bank. Apollo, one of the world’s largest alternative asset managers, is among other investors looking to buy pieces of Silicon Valley Bank, reported Bloomberg quoting sources.
Meanwhile, a report on axios.com said JPMorgan and PNC are among the potential suitors that may acquire SVB Financial Group. The deal would exclude the commercial bank that is currently under U.S. government control.
With hindsight, there were warning signs ahead of last week's spectacular collapse of Silicon Valley Bank, missed not only by investors, but by bank regulators.
Just why the oversight failed remained a hot question among banking experts Monday, with some focusing on the weakness of US rules.
The Federal Reserve announced Monday plans for a "thorough, transparent and swift" review of the supervision of SVB that will be publicly released on May 1, effectively acknowledging that it could have done better.
President Joe Biden promised a "full accounting of what happened," adding that he would ask regulators and banking regulators to tighten rules on the sector. {Read More}
After the worst bank collapse in the US in a decade, SVB Financial Group and two top executives were sued by investors and shareholders on Monday, reported Reuters. The two were accused of concealing how rising interest rates would leave its Silicon Valley Bank unit, which failed last week, "particularly susceptible" to a bank run.
The proposed action against SVB, Chief Executive Greg Becker and Chief Financial Officer Daniel Beck was filed in the federal court in San Jose, California.
The filed case is the first in the series of likely lawasuites over the demise of Silicon Valley Bank. SVB had surprised the market two days earlier by disclosing a $1.8 billion after-tax loss from investment sales and that it planned to raise capital, as it scrambled to meet redemption requests.
The US Federal Reserve on Monday announced to launch an internal review of its supervision and regulation of Silicon Valley Bank after its collapse last week. The review will be release by May 1 and will be chaired by Vice Chair for Supervision Michael Barr. The collapse of the lender has sent global shockwaves in stock markets across the world. The bank was overseen by the San Francisco Fed and was the biggest bank failure in more than a decade.
“The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve," Fed Chair Jerome Powell said in a statement.
Newly Appointed CEO of Silicon Valley Bank, Tim Mayopoulos, said the company is open and conducting business as usual, reported Reuters citing a SVB Financial Group letter.
He also stated that the company's business is normal within the US and is expected to resume cross-border transactions in coming days. He also added that all the depositors have full access to their money and new and existing deposits are also protected.
The recent events of bank collapse and their ripple effect in the market and economy has made clear that people can loose money even as being a depositor, said American Investor Bill Ackman in his tweet on Monday.
In his tweet, he also drew out the attention towards the two tier deposit system established in the USA to secure depositors’ money kept in banks.
“In a world with @Twitter - speed spread of information and smart-phone-enabled bank accounts where withdrawals can be made with the push of a button, no bank is safe from a run unless the depositor has an explicit gov't guarantee that ensures that they always have complete access to the total value of their deposits," said Bill in his tweet.
Amid rising fear in US banking crisis, Asia share markets continue to slid during early trade on Tuesday. The downfall was led by Japan's financial stocks losses. The asian share market is tumbling as the US banking crisis gripped investors ahead of US inflation data release. The crisis widened with the fallout of Signature Bank. Investors continue to doubt the US government's hastily formed rescue plan.
Heavy selling hit U.S. regional bank stocks and traders raced headlong from bets on U.S. rate hikes, reckoning the Fed would now be thinking twice. reported Reuters.
Amid the falling US bank stocks, investors are questioning the efficacy of the US government's hastily made rescue plan on weekend for the banking system to prevent more fallout from the collapse of SVB Financial Group's Silicon Valley Bank.
US bank stocks slid, including those of San Francisco-based First Republic Bank, which tried to reassure investors with a statement about the strength of its liquidity. The company’s shares plunged a record 62% in New York. Among other regional banks, Phoenix-based Western Alliance Bancorp slumped 47%, and Beverly Hills, California-based PacWest Bancorp slid 21%, reported Bloomberg.
Major lenders also took a hit. Wells Fargo & Co. was down 7.1%, Citigroup Inc. slipped 7.5% and Bank of America Corp. declined 5.8%. The KBW Bank Index dropped 12%, the steepest decline since March 2020. (Bloomberg)
America's biggest rooftop solar company, Sunrun Inc., said it can tap its cash at Silicon Valley Bank. It also informed of its good access to capital despite solar investors' concerns about rising rates after the collapse of the startup lender. The company had access to the $80 million in deposits at the bank till yesterday. The company had $953 million in cash at the end of 2022.
“We have really good access to capital," Chief Executive Officer of Sunrun Mary Powell said in an interview Monday at Bloomberg’s bureau in San Francisco.
Oil held losses ahead of key inflation data as the biggest US bank collapse since 2008 continued to ripple through financial markets. West Texas Intermediate traded below $75 a barrel after closing 2.5% lower on Monday following a volatile session. Investors will be watching the consumer price index read due later Tuesday for clues on the path forward for monetary tightening, though bets are increasing the Federal Reserve won’t raise interest rates next week due to the fallout from the demise of Silicon Valley Bank. “Oil has been unable to escape the spill over from the collapse of SVB," said Warren Patterson, head of commodities strategy for ING Groep NV. “There is still plenty of room for further volatility in the short term with US CPI data." (Bloomberg)
Signature Bank's collapse is another casualty in the ongoing banking turmoil. The company's online payment network continues to be online even after the lender was put into receivership, reported Bloomberg. Signet, a blockchain-based system, has been a key piece of the infrastructure powering the 24/7 crypto market. The system, a competitor to Silvergate Capital Corp.’s now-defunct SEN, counted stablecoin issuer Circle, crypto exchange Coinbase and a range of crypto trading shops among its users. Signet used technology developed by Tassat, which builds private blockchains for banks. (Bloomberg)
One of the largest alternative asset managers, Apollo Global Management Inc has expressed interest in snapping up a book of loans held by collapsed Silicon Valley Bank. Apollo is considering to buy pieces of the bank, reported Reuters. The bank had $73.6 billion of loans as of Dec. 31, 2022, but the size of the loan book Apollo is interested in couldn’t be determined. Apollo declined to comment.
The Federal Deposit Insurance Corp. took over Silicon Valley Bank on Friday, after its long-established customer base of tech startups began withdrawing deposits en masse.
At the end of last year, the bank had more than $175 billion in mostly uninsured deposits and $209 billion in total assets. Many of those assets were long-term bonds the bank had to sell at a loss due to rising interest rates.
Federal Reserve Vice Chair Michael Barr will lead a review of the supervision and regulation of Silicon Valley Bank "in light of its failure," the central bank announced Monday.
"The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve," said Fed Chair Jerome Powell, according to the statement. The review will be publicly released by May 1. (AFP)
Credit risk indicators flashed red on Monday, as investors worried about contagion risks across corporate debt markets after the collapse of Silicon Valley Bank (SVB) and New York's Signature Bank in the space of 72 hours.
An index of credit default swaps (CDS) on U.S. investment-grade companies rose to 90.2 basis points, its highest since November, after U.S. action to guarantee deposits at tech-focused lender SVB failed to reassure investors that other banks remain financially sound.
The equivalent index for CDS on junk-rated companies fell in price to 98.8 on Monday, its lowest since November. In Europe, the cost of insuring exposure to European junk bonds on Monday posted its biggest jump in three months.
Rising CDS spreads signal investors are hedging bets on a deterioration in credit quality.
"Unfortunately these things tend to rarely be isolated," said Jordan Kahn, president and chief investment officer at ACM Funds in Los Angeles.
"This is a really ugly credit event that's happening and the Fed and the Treasury have come out to backstop it, but even if there is some relief period after this, (my concern is) that it will spread to other things," he said. "There are other types of credit events that are likely to unfold." (Reuters)
European stocks logged their steepest one-day fall this year on Monday on continued drag from banking stocks even as authorities stepped in to limit the fallout from the sudden collapse of Silicon Valley Bank. European banking stocks dropped 5.7%, notching their worst two-day selloff since the Russia-Ukraine war broke out early last year.
Britain has well capitalised banks, Prime Minister Rishi Sunak said on Monday, adding his voice to ministers and officials who say there is no concern about systemic risk following the collapse of Silicon Valley Bank.
"Our banks are well capitalised, the liquidity is strong," Sunak told ITV during a visit to the United States, reported Reuters
"I think the Bank of England Governor was right and the Chancellor was right to address this and make it clear that actually our banks are well capitalised and they don't have any concerns about systemic risk."
Nasscom on Monday said the US administration's stance on protecting depositors of Silicon Valley Bank that collapsed, is "reassuring" for Indian startups who have funds in that bank.
The announcement by Biden administration's that depositors of Silicon Valley Bank (SVB) will have access to their money, has given hope, said Nasscom's Senior Vice President and chief strategy officer Sangeeta Gupta reported PTI.
It will address the immediate financial issues that Indian startups were grappling with, she added.
First Republic Bank has been able to meet withdrawal demands on Monday with the help of additional funding from JPMorgan Chase & Co, the mid-cap lender's Executive Chair Jim Herbert told CNBC.
The bank was not seeing massive outflow of deposits, Herbert said.
Exchanges just halted trading in several bank stocks due to volatility. The sector is once again selling off sharply in early trading Monday.
Currently halted stocks include - PacWest Bancorp, Zions Bancorporation, First Republic Bank, Regions Financial, reported WSJ
Euro zone supervisors see limited consequences for banks in the region from the collapse of two U.S. lenders, while stressing the need to watch any further spillover closely.
Investors were selling euro zone bank shares and reeling in their bets on interest rate increases by the European Central Bank after Silicon Valley Bank became the largest U.S. bank to fail since the global financial crisis of 2008, prompting U.S. authorities to step in.
But a senior European Central Bank supervisor said euro zone banks were well funded and more conservative than SVB, which mostly lent to tech startups, and New York-based rival Signature Bank, which was wound down at the weekend, reported Reuters.
The source said supervisors saw no direct implication of the SVB collapse for euro zone banks but cautioned this could change if the fallout in the United States extended to bigger banks, raising the risk of contagion.
US stock indexes were mixed in choppy trading on Monday as investors weighed a possible pause in interest rate hikes by the Federal Reserve in March and risks of a contagion from Silicon Valley Bank's collapse.
Regulators over the weekend stepped in to restore investor confidence in the banking system, saying Silicon Valley Bank depositors will have access to their funds on Monday.
President Joe Biden said that the administration's swift actions to help depositors in two U.S. banks should give Americans confidence that the banking system is safe.
Trading in shares of SVB's peer Signature Bank, which was shut down by regulators on Sunday, was halted.
First Republic Bank dropped 76.6% as news of fresh financing failed to reassure investors, while Western Alliance Bancorp, PacWest Bancorp fell 82.5% and 53% respectively. Trading in the stocks was halted several times due to volatility.
Shares of big U.S. banks including JPMorgan Chase & Co , Morgan Stanley and Bank of America fell between 0.8% to 6%.
The KBW regional banking index fell 9.8%, while the S&P 500 banks index dropped 6.4%.
Dow Jones Industrial Average was up 28.10 points, or 0.09%, at 31,937.74, the S&P 500 was down 1.70 points, or 0.04%, at 3,859.89, and the Nasdaq Composite was up 26.58 points, or 0.24%, at 11,165.47.
Oil prices fell $2 in volatile trading on Monday as the collapse of Silicon Valley Bank hit equities markets and raised fears of a fresh financial crisis, but a recovery in Chinese demand provided support.
Brent crude futures were down $2.03, or 2.5%, to $80.75 per barrel by 1401 GMT. West Texas Intermediate U.S. crude futures (WTI) fell $2.11, or 2.8%, to $74.57 a barrel.
First Republic Bank's shares plunged on Monday as news of fresh financing failed to assuage investor fears of contagion in the banking sector after SVB Financial Group's downfall last week. The U.S. regional lender's stock was last down 67% at $27.08 before its trading was halted for volatility.
The US government and financial authorities have acted decisively in response to the collapse of Silicon Valley Bank and Signature Bank , German Finance Minister Christian Lindner said on Monday.
US regulators were forced to step in with a series of emergency measures after the failure of the two banks, which threatened to trigger a broader crisis.
European and German financial institutions are monitoring the situation, Lindner said in Brussels on the sidelines of a Eurogroup meeting.