The Market starts to shake after SVB collapse
On Wednesday, bank stocks in both the U.S. and Europe took a significant hit as the fallout from Silicon Valley Bank’s collapse continued to ripple through the global financial system. This collapse marked the largest bank failure since 2008, and its effects are now being felt across the industry.
In early trading, Credit Suisse shares fell by over 26% after a key backer announced they would not provide additional cash to support the Swiss bank. The pressure on the banking industry appeared to affect some of the largest U.S. banks as well. Citi fell almost 5%, while J.P. Morgan Chase and Wells Fargo both dropped nearly 4%.
This downward trend had a knock-on effect on major stock indexes, with the Dow Industrial Average falling over 500 points, representing a 1.3% decline, and the S&P 500 and Nasdaq both falling by about 1.5%.
The struggles of the banking sector represent the latest fallout from Silicon Valley Bank’s collapse, which saw the 16th-largest bank in the U.S. fail on Friday. Two days later, Signature Bank, the nation’s 29th-largest bank, closed its doors, suggesting that the financial panic had spread.
Despite bank stocks rallying on Tuesday and regaining much of their losses, the broad decline in early trading on Wednesday renewed fears of damage to the wider financial system. The Justice Department and the Securities and Exchange Commission are now investigating the fall of Silicon Valley Bank, and the Federal Reserve Board has announced a review of the “supervision and regulation of Silicon Valley Bank, in light of its failure.”
The Federal Deposit Insurance Corporation took over Silicon Valley Bank on Friday to protect depositors, and fearing a wider spread of the crisis after the collapse of Signature Bank, the FDIC, the Treasury Department, and the Fed took further action on Sunday. They told depositors in both fallen banks that the FDIC would protect all of their funds, including those that exceed its $250,000 limit. Later that day, the Fed announced an emergency lending program to cover the deposits at issue and restore wider confidence in the financial system.
Still, the worldwide fallout in the banking sector appears ongoing. While some financial institutions were spared, such as Schwab, the eighth-largest U.S. bank, which ticked up almost 3%, France’s two largest international banks, Societe Generale SA and BNP Paribas SA, fell more than 10%, and Deutsche Bank AG, a top German lender, plummeted 8%.
