Shares of First Republic Bank tanked by nearly 70% in pre-market trading on Monday — just hours after federal regulators announced that they would step in and assume control of failed lenders Silicon Valley Bank and Signature Bank.
The San Francisco-based First Republic Bank, a regional lender with more than $216 billion in assets under management, led Monday’s decline in the banking sector — fueling more fears that large financial institutions were at risk.
PacWest Bancorp’s stock price was down by nearly 40% in pre-market trading on Monday while Western Alliance Bancorp shares fell by some 20%.
Charles Schwab’s stock price fell by some 12% before the opening bell on Monday while Bank of America shares shed around 4%.
First Republic’s stock price has taken a beating recently — falling 29% in the last two trading sessions on Wall Street.
Steven Rattner, the Wall Street financier who advised then-President Barack Obama during the 2009 bailout of the auto industry, wondered whether the falling stock price will ignite a run on the banks.
“Shares of First Republic and PacWest Bancorp set to open way down today,” Rattner tweeted on Monday morning.
“What will their depositors do?”
The Biden administration on Sunday sought to head off a potential banking crisis after the historic failure of Silicon Valley Bank, assuring all depositors at the failed institution that they could access all their money quickly, even as another major bank, Signature, was shut down.
The announcement came amid fears that the factors that caused the Santa Clara, California-based bank to fail could spread.
Regulators had worked all weekend to try to find a buyer for the bank, which was the second-largest bank failure in history. Those efforts appeared to have failed Sunday.
The near-financial crisis that US regulators had to intervene to prevent left Asian markets jittery as trading began Monday.
Japan’s benchmark Nikkei 225 sank 1.6% in morning trading, Australia’s S&P/ASX 200 lost 0.3% and South Korea’s Kospi shed 0.4%.
But Hong Kong’s Hang Seng rose 1.4% and the Shanghai Composite increased 0.3%.
Manhattan-based Signature Bank — a key financial institution for the cryptocurrency industry — was shut down over a “similar systemic risk exception,” according to a joint statement from the heads of the US Treasury, Federal Reserve and Federal Deposit Insurance Corp.
Silicon and Signature depositors will be made whole, but the banks’ shareholders and unsecured debtors will not be protected, officials said.
Follow noti.group’s coverage of Silicon Valley Bank’s collapse
The California-based Silicon Valley had $209 billion in assets when it failed Friday, while Signature Bank had more than $110 billion.
Silicon was the second largest bank to collapse in US history, after Washington Mutual in 2008. Signature was the third-largest.
The Federal Reserve said it will create a new Bank Term Funding Program to offer depository institutions loans of up to one year, backed by US Treasury securities and other assets, to help the banks.
The feds said the steps they are taking “will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”
With Post Wires
[Written in collaboration with other media outlets with information from the following sources]
