Shares of Banks Rout Deepens Amid SVB Collapse

The shares of banks in the U.S. fell sharply on Monday following the failures of Silicon Valley Bank (SVB) and Signature Bank. The regional lender First Republic Bank was the biggest loser, slumping by over 60%.

As of press time, the California-based bank's stock fell by 61.83% to $31.21. In addition, other banks, financial services companies and lenders also witnessed significant drops in their stock price. For example, Western Alliance Bancorp fell by 47.06% to $26.12; KeyCorp fell by 27.33% to $11.38; Zions Bancorporation fell by 25.72% to $29.97, etc. Many of these stocks were halted several times during the day due to the volatility.

Meanwhile, the Federal Reserve announced that it is launching a new Bank Funding Program (BTFB) aimed at safeguarding institutions affected by market volatility due to the collapse of SVB. The Fed's easing program will offer loans of up to one year to banks, savings banks and other credit institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral, such as mortgage-backed bonds. However, the share prices of those financial institutions are still falling.

Silicon Valley Bank, a bank that serves technology companies, collapsed last week after it was unable to meet customer withdrawal needs. Last Wednesday, the bank sold its bond portfolio comprising mostly US Treasures at a $1.8 billion loss. On Thursday, the bank announced its plan to offer to its investors common equity and preferred convertible stocks worth $2.25 billion. By Friday, however, the bank was under FDIC receivership. The UK arm of SVB was also sold to HSBC for £1​.

Later on Sunday (March 12), a Joint Statement by Treasury, Federal Reserve, and FDIC was released: "Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer." 

Furthermore, the regulators on the same day shut down Signature Bank, a big lender in the crypto industry, in a bid to prevent the spreading banking crisis.

"We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer," stated in the joint announcement.