Deposits in the country’s banking system are stabilizing, Reuters reported, citing an unnamed US official.
A US official has said the deposit outflows that rocked many regional banks after the bankruptcy of Silicon Valley Bank had slowed and in some cases reversed, even as investors tried to ascertain whether the crisis was under control.
Shares of regional banks such as First Republic Bank, PacWest Bancorp and Western Alliance Bancorp have plummeted since the banking crisis began on March 8 with the collapse of Silvergate Capital Corp and intensified when US regulators took over Silicon Valley Bank and Signature Bank.
A US official, speaking on condition of anonymity, told Reuters news agency on Sunday that deposits in the country’s banking system were stabilizing and that US banks had limited exposure to Credit Suisse Group AG, the Swiss lender teetering on bigger loans. peer UBS Group AG agreed to acquire it on Sunday.
Many of the regional banks have also said their deposit base has stabilized. However, some of them, including First Republic and PacWest, have attempted to raise private capital but have so far been unsuccessful amid concerns from peers and private equity firms about possible losses in their investment portfolios and loan portfolios. sources.
“The regional banks have come under pressure because they are less well equipped to handle deposit taking than the big banks,” said Marc Chandler, New York-based chief market strategist at Bannockburn Global Forex.
In solidarity, most major banks agreed on Thursday to deposit $30 billion into First Republic. But in a blow to the bank’s financial outlook on Sunday, S&P Global downgraded First Republic’s credit rating deeper into junk territory and warned another downgrade was possible, citing the effect of deposit outflows.
Sources said Sunday that First Republic was still trying to piece together a capital raise, but no deal was imminent. The customers raised about $70 billion in deposits, nearly 40 percent of the total, The Wall Street Journal reported citing people familiar with the matter. But the shooting stabilized on Friday.
First Republic said in a statement that it was “well positioned to manage short-term deposits.”
At least four U.S. lawmakers said on Sunday they would consider whether a higher federal insurance limit on bank deposits than the current $250,000 threshold was needed to inspire more confidence in the system.
Billionaire investor Warren Buffett, who helped bail out some banks during the 2008 financial crisis, has held talks with senior U.S. officials about the banking crisis, a source said Saturday. Buffett has not yet backed any of the regional banks.
The Federal Deposit Insurance Corporation (FDIC), the US regulator that acquired Silicon Valley Bank and Signature Bank, made some progress on Sunday in returning one of them to the private sector.
It said New York Community Bancorp would buy deposits, loans and 40 branches from Signature Bank. New York Community buys $12.9 billion worth of loans at a $2.7 billion discount. The FDIC estimated the deal would cost its deposit insurance fund about $2.5 billion, highlighting the government backstop needed to close the deal.
However, the FDIC failed to find a buyer for the entire Silicon Valley Bank this weekend and will now seek new bids for parts of the bank on Wednesday and Friday, sources told Reuters.