On Wednesday, March 15, 2023 at 5:04:58 PM UTC, ltlee1 wrote:
https://asiatimes.com/2023/03/the-us-banking-crisis-isnt-over-yet-far-from-it/
"Customers of SVB were withdrawing their deposits beyond what it could pay using its cash reserves, and so to help meet its obligations the bank decided to sell $21 billion of its securities portfolio at a loss of $1.8 billion. The drain on equity
capital led the lender to try to raise over $2 billion in new capital.
The call to raise equity sent shockwaves to SVB’s customers, who were losing confidence in the bank and rushed to withdraw cash. A bank run like this can cause even a healthy bank to go bankrupt in a matter days, especially now in the digital age.
In part, this is because many of SVB’s customers had deposits well above the $250,000 insured by the Federal Deposit Insurance Corp – and so they knew their money might not be safe if the bank were to fail. Roughly 88% of deposits at SVB were
uninsured.
Signature faced a similar problem, as SVB’s collapse prompted many of its customers to withdraw their deposits out of a similar concern over liquidity risk. About 90% of its deposits were uninsured.
Systemic risk?
All banks face interest rate risk today on some of their holdings because of the Fed’s rate-hiking campaign.
This has resulted in $620 billion in unrealized losses on bank balance sheets as of December 2022.
...
The US government’s decision to backstop all deposits of SVB and Signature regardless of their size should make it less likely that banks with less cash and more securities on their books will face a liquidity shortfall because of massive withdrawals
driven by sudden panic.
However, with over $1 trillion of bank deposits currently uninsured, the banking crisis is far from over."
https://www.wsj.com/articles/first-republic-stock-plunges-after-bank-rescue-plan-dividend-suspension-e18fa90c
"First Republic Bank FRC -32.80%decrease; red down pointing triangle
shares fell more than 30% Friday after a multibillion-dollar rescue deal orchestrated by the biggest U.S. banks failed to convince investors that the troubled lender is on solid footing.
The move erased the gains that came Thursday, when a group of banks including JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. deposited $30 billion in First Republic in an effort to restore confidence in a banking system
badly battered by a pair of bank failures.
Friday’s plunge reflects concerns that the big-bank rescue deal didn’t fully address problems at First Republic, which also suspended its dividend Thursday. The tumult has analysts asking if the company could be pressured to find a buyer.
“It’s not clear whether it’s viable as a stand-alone entity,” said Julian Wellesley, global banks analyst at Boston-based Loomis Sayles & Co. “So it’s likely, in my view, to be taken over.”
First Republic declined to comment. In a regulatory filing Thursday, the bank said deposit outflows had slowed significantly. The rescue deal, it said, was “a vote of confidence for First Republic and the entire U.S. banking system.”
The sudden collapse recently of Silicon Valley Bank and Signature Bank—the second- and third-largest bank failures in U.S. history, respectively—have sparked concerns that anxious customers could drain deposits from other small and midsize banks."
Again, over $1 trillion of bank deposits are currently uninsured.
"A $30 billion deposit influx from biggest U.S. banks fails to calm jittery investors" not surprising.
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