Banking shares slump despite U.S. assurances that deposits are safe
Bank stocks slumped on Monday – with First Republic down more than 60% at one point – before shares were halted, despite emergency action by the U.S. to shore up confidence in the financial system after the collapse of Silicon Valley Bank.
Trading of shares of other smaller and regional lenders, including East West Bankcorp and PacWest Bancorp, were also halted after suffering steep declines.
The declines come despite an emergency measure by regulators to protect depositors at Silicon Valley Bank and Signature Bank on Sunday, as well as comments by President Biden on Monday to reassure Americans about the safety of bank deposits.
Investors are nonetheless concerned that other banks, especially smaller and regional lenders, would be unable to meet any surge in redemption requests even after the Federal Reserve said on Sunday it would make funding available for banks that require them.
Regulators also said they would protect all deposits at Silicon Valley Bank as well as Signature Bank, which was shut down by New York regulators.
First Republic, a bank with a high number of clients that are wealthy depositors and businesses, was among the biggest decliners among bank shares, extending steep declines from last week.
Bigger lenders such as Bank of America and Wells Fargo also fell.
The falls in bank shares initially dragged down broader indexes, but they recovered later, with the Dow Jones Industrial Average up 0.6% as of mid-morning.