Washington, Mar. 20 (BNA): Deposit outflows that left many regional banks reeling in the wake of the Silicon Valley bank failure have slowed and in some cases reversed, as investors try to make sure the crisis is contained, a US official said.
Shares of regional banks such as First Republic Bank, PacWest Bancorp and Western Alliance Bancorp (WAL.N) have fallen since the banking crisis began on March 8 with the collapse of Silvergate Capital Corp.
It intensified as US regulators took control of Silicon Valley Bank and Signature Bank, according to Reuters.
A US official, speaking on condition of anonymity, told Reuters that deposits in the country’s banking system were stabilizing and that US banks had limited exposure to Credit Suisse Group AG (CSGN.S), the Swiss lender that swung ahead of approval from larger peer UBS Group AG. to get it.
Several regional banks also said their deposit base has stabilized.
Some of them, including First Republic and Backwest, have been seeking to raise capital privately, sources told Reuters, but so far have been unsuccessful, amid concerns from peers and private equity firms about potential losses in their investment portfolios and loan books.
Mark Chandler, senior market analyst at Bannockburn Global Forex in New York, said regional banks have come under pressure because they are less willing to handle deposit withdrawals the way big banks are.
In a move of solidarity, most major banks on Thursday agreed to deposit $30 billion into the First Republic.
In a blow to the bank’s financial outlook, S&P Global downgraded First Republic’s credit rating to junk territory and warned of another possible downgrade, citing the impact of deposit outflows.
Sources said the First Republic was still trying to raise capital, but no deal was forthcoming.
First Republic said in a statement that it is “well positioned to manage its short-term deposit business.”
At least four US lawmakers said on Sunday they would consider whether a higher federal insurance limit on bank deposits than the current limit of $250,000 is needed to generate more confidence in the system.
Billionaire investor Warren Buffett, who helped bail out some banks during the 2008 financial crisis, has had discussions with senior US officials about the banking crisis, a source said on Saturday.
Buffett has yet to endorse any of the regional banks.
The Federal Deposit Insurance Corporation (FDIC), the US regulator that acquired Silicon Valley Bank and Signature Bank, has made some progress in returning one of them to the private sector.
It said New York Community Bancorp (NYCB.N) will buy deposits, loans and 40 branches of Signature Bank.
The New York Community will purchase $12.9 billion in loans at a discount of $2.7 billion.
The FDIC estimated that the deal would cost the Deposit Insurance Fund about $2.5 billion, highlighting the government support that was necessary to seal the deal.
However, the FDIC failed in its attempt to find a buyer for the entire Silicon Valley bank this weekend, sources told Reuters, and will now seek new bids for parts of the bank on Wednesday and Friday.
NAA