How in just 11 days four banks collapsed and a fifth is staggering

Brokers on the New York Stock Exchange (REUTERS/Brendan McDermid) (BRENDAN MCDERMID/)

How quickly they collapsed four banks, and one keeps fighting, has left investors stunned. Although the bankruptcies occurred in the span of only 11 daysthe circumstances that caused them were unique.

Here’s how the business turmoil played out, and how regulators responded, amid concerns the crisis could spread further.


Sam Bankman-Fried (REUTERS/David Dee Delgado)
Sam Bankman-Fried (REUTERS/David Dee Delgado) (DAVID DEE DELGADO/)

Silvergate Capital Corp. It was the first US bank to go under, due to its exposure to the collapse of the banking sector. crypto assets. With the authorization of the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) had tried to intervene, discussing with management ways to avoid a shutdown.

But the La Jolla, California-based company was unable to recover amid scrutiny from regulators and a criminal investigation by the Justice Department’s fraud unit into dealings with crypto giants. FTX and Alameda Researchby Sam Bankman-Fried.

Although no wrongdoing was alleged, Silvergate’s problems were compounded when the bank sold loss-making assets to cover the withdrawals of its frightened clients. On March 8, it announced plans to shut down its operations and liquidate its bank.

Silicon Valley Bank

FILE PHOTO: A security guard at the SVB in Santa Clara, California (REUTERS/Brittany Hosea-Small)
FILE PHOTO: A security guard at the SVB in Santa Clara, California (REUTERS/Brittany Hosea-Small) (BRITTANY HOSEA-SMALL/)

with the obituary of Silvergate practically written, investors and depositors of Silicon Valley Bank of SVB Financial Group were already nervous when the company announced on March 8 a plan to sell $2.25 billion in shares, as well as significant losses in his investment portfolio.

Shares of the company plunged a 60% the day after the news broke, and a day later the FDIC took control of the entity. US regulators proceeded to dissolve the bank not finding a suitable buyer. But more hopeful news emerged on Monday, when the FDIC expanded the bidding process after receiving a “substantial interest” from multiple potential buyers.

First Citizens BancShares, one of the largest buyers of failed US lenders, is still hoping to reach an agreement for all of Silicon Valley Bank, Bloomberg News reported Monday, citing people familiar with the matter.


A Signature Bank headquarters in New York (REUTERS / Brendan McDermid)
A Signature Bank headquarters in New York (REUTERS/Brendan McDermid) (BRENDAN MCDERMID/)

SignatureBank became the third largest bank failure in US history on March 12, following a wave of customer withdrawals that totaled about twenty% of company deposits.

The implosion of Silvergate four days earlier it had made clients reluctant to keep their deposits at Signature Bank, despite its much lower cryptocurrency exposure. Federal regulators said they had lost confidence in the company’s management. and placed the bank under receivership. Both insured and uninsured clients were given access to all their deposits, under a provision that regulators resorted to known as the “systemic risk waiver.”

Signature Bank’s deposits and some of its loans were purchased by Flagstar Bank of New York Community Bancorp late Sunday. The acquirer agreed to buy from the FDIC $38 billion in assets, which included $25 billion cash and some $13 billion in loans. He also assumed liabilities of some US$36 billion, including $34 billion in deposits. Signature branches will now operate as Flagstar locations.

Credit Suisse

Credit Suisse headquarters in Zurich, Switzerland (REUTERS/Denis Balibouse)
Credit Suisse headquarters in Zurich, Switzerland (REUTERS/Denis Balibouse) (DENIS BALIBOUSE/)

Credit Suisse Group fell on Sunday when the Swiss authorities negotiated an agreement with UBS Group for an acquisition of 3 billion francs ($3.2 billion) aimed at averting a broader financial crisis. The only other option being considered was full or partial nationalization.

The end of the Swiss institution, of 166 years old, came after the CEO, ulrich koerner, tried to save the bank with a massive approach to customers, who last year had withdrawn an unprecedented amount of funds from the bank. Ultimately, the attempt was not enough to offset the multiple scandals and multi-million dollar losses stemming from Credit Suisse’s dealings with disgraced financier Lex Greensill and the failed investment firm Archegos Capital Management.

On March 9, the US Securities and Exchange Commission questioned the bank’s annual report, forcing it to delay its publication. Panic broke out after the bankruptcy of regional US banks and the president of the bank’s largest shareholder, the Saudi National Bank, ruled out further investment in the company.

First Republic

File image of a person passing in front of a First Republic Bank branch in New York, USA (REUTERS / Mike Segar)
Archive image of a person passing in front of a First Republic Bank branch in New York, USA (REUTERS/Mike Segar) (Mike Segar/)

First Republic Bank has been a victim of the same customer flight that ended up sinking three of its US rivals, with an estimate of possible deposit outflows that places them at USD 89,000 million.

Eleven US banks tried to prop up First Republic Bank with a liquidity injection of $30 billion last week. Yet the San Francisco-based company, which caters to the personal banking needs of the tech elite and other wealthy individuals, has fallen to record lows amid multiple downgrades.

The executive director of JPMorgan ChaseJamie Dimon, devised a new plan to help the First Republic that would turn part or all of the injection of $30 billion of deposits from the 11 banks into a capital injection, Bloomberg reported Monday, citing people familiar with the situation.

(With information from Bloomberg)

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