Buyers of deposits and loans at Silicon Valley Bank helped European lender stocks partially recover on Monday.
Bloomberg News reported that US regulators are in early stages of deliberations on expanding emergency credit lines to contain the worst banking shock since the 2008 global financial crisis.
The sudden collapse of the technology-focused SVB earlier this month has destabilized the sector and drawn some of Europe’s biggest bank names to the attention of investors.
A sign that the failure was smoothly resolved by the authorities could help underpin confidence.
Last weekend, First Citizens BankShares purchased all of SVB’s loans and deposits and gave the Federal Deposit Insurance Corporation shares worth up to $500 million, the FDIC said in a statement.
According to North Carolina-based First Citizens, customers will still be able to access their accounts and branches will open on Monday.
The FDIC estimates that the SVB failure will cost the deposit insurance fund about $20 billion.
“The move is good for financial stability and the venture capital industry,” said Gary Ng, senior economist at Natixis Hong Kong.
European bank stocks opened higher on Monday after a violent session earlier.
Deutsche Bank, Germany’s biggest lender, fell 8.5% on Friday as bond premiums against default risk jumped, but rose 4.5% in early trading on Monday.
A broader index of major European banks rose 1.4% after falling nearly 4% in the previous session.
SVB’s First Citizens deal has sealed the first weekend of several weeks that brought no news of any new bank failures, rescues or emergency aid from the authorities.
“You’ve swept Silicon Valley to another buyer, and that’s a good thing,” IG Markets analyst Tony Sycamore said in Sydney.
“But the bigger issue is insuring deposits at all the other[regional US]banks … a little calmer before the next storm.”
The week ended with flashing indicators of financial market stress.
Asian bank stocks were mixed on Monday, mostly flat in Australia and Tokyo but down in Hong Kong. In Hong Kong, Standard Chartered shares fell nearly 4% as prices caught up with Friday’s crash in Europe.
S&P 500 futures were up 0.5%.
The SVB debacle forced U.S. depositors to flee from smaller banks to the larger ones, and the blow to credit led Credit Suisse to join rival UBS last week.
In March, the Stoxx index of European bank stocks fell more than 18% and the US KBW Regional Banks Index fell 21%, leaving investors nervous about what’s next.
“I don’t think you can sit here and say, ‘Silicon Valley banks and Credit Suisse are all over and life will go back to normal,'” said Shane Elliott, chief executive of Australia and New Zealand Banking Group. CEO) said. He said in an interview posted on the bank’s website.
“These things tend to go on over a long period of time,” Elliott said.
carrot, stick, acronym
The sudden rise in banking tensions has raised questions about whether major central banks will continue to aggressively raise interest rates to keep inflation in check and whether tightening lending will hurt the global economy.
US Federal Reserve (Fed) policymakers said on Sunday stress in the banking sector is being closely monitored as it could trigger a credit crunch, while European Central Bank officials also said lending could tighten. warned of potential
In Europe, bank bonds are under pressure, making the cost of credit default swaps, or insurance against defaults, unsettlingly high.
In the US, money market fund inflows have increased by more than $300 billion in the past month, reaching a record of over $5.1 trillion, with a focus on depositor confidence.
SBV trading could boost some of that. First Citizens said it has $110 billion in assets, $56 billion in deposits and $72 billion in loans, and will expand in California.
In addition, we share potential losses with the FDIC, which holds approximately $90 billion in securities for disposal.
“In effect, it’s a combination of carrots and sticks and an acronym to ensure you get the results you want and allow (the authorities) to use interest rates to deal with inflation,” said Michael Every, strategist at Rabobank. rice field.
“This seems to be part of it.”