In the US, the next bank has come under pressure: First Republic Bank shares lost more than 60 percent in pre-market trading on Monday. Investors did not believe assurances by the San Francisco-based institute that it had sufficient liquidity.
On Sunday, the bank said it had more than $70 billion of unused liquidity to finance the business. These came from agreements with the Federal Reserve and JPMorgan Chase & Co.
"The additional borrowing capacity from the Federal Reserve, continued access to financing through the Federal Home Loan Bank and the ability to obtain additional financing from JPMorgan Chase & Co increase, diversify and strengthen First Republic's existing liquidity profile," First Republic Bank said.
Bought up in the financial crisis
First Repulic Bank, unlike the closed-end Silicon Valley Bank, which specializes in start-up financing, is a full-featured bank. The institute had already been bought in the financial crisis, first by Merryll Lynch, after the bankruptcy of Lehman Brothers by Bank of America and returned to investors in 2009.
The consequences of the collapse of Silicon Valley Bank also weighed on stock markets in Europe on Monday. On Monday, the Dax extended its losses from last week. The banking sector remains a concern for investors. The possible consequences in the USA are currently being weighed, said a stock market expert. In the afternoon, Germany's leading index fell by 3 percent to 14,993 points. The M-Dax lost 3.2 percent to 27,111 points. The leading eurozone index EuroStoxx 50 fell by 3 percent to 4103 points.
Commerzbank under pressure
Deutsche Bank's share price fell by 6 percent after losing a good 7 percent on Friday. In the meantime, Commerzbank's shares fell by 11.8 percent after a minus of 2.6 percent on Friday, but then recovered slightly. In the early afternoon, the Dax returnee was down 10 percent. Bank shares across Europe were under pressure, with the Stoxx banking index plummeting by 7 percent. In Zurich, the shares of crisis-ridden Credit Suisse fell by 6.5 percent to 2.30 francs. UBS shares fell 6.75 percent.
Bafin orders moratorium
The securing of all deposits by the US authorities, after the faltering American start-up financing bank SVB and the New York-based Signature Bank had to be closed, has not yet provided the hoped-for calm on the stock markets. "But it also shows how seriously the US Federal Reserve, the FDIC protection fund and the Treasury Department take the case," said portfolio manager Thomas Altmann of trading house QC Partners. "The big and crucial question now is how many banks will follow."
Even before the weekend, SVB, which specialises in start-up financing, had been temporarily closed and placed under state control after a failed emergency capital increase. The financial services supervisory authority Bafin ordered a moratorium on the German branch of the SVB in Frankfurt on Monday. The supervisors justified the decision with "the existing risk for the fulfilment of obligations towards creditors". Silicon Valley Bank in Frankfurt is a banking partner of German companies such as Hellofresh and Lilium.
The Bafin measures concern a ban on sales and payments. In addition, the German SVB must close the bank for dealings with customers. However, Bafin sees no threat to financial stability from the SVB's plight. The balance sheet total of the branch in Frankfurt was 2022.789 million euros at the end of 2. Nevertheless, the Bundesbank's financial crisis unit will also discuss the possible effects of the SVB collapse on Monday. The committee is meeting to analyse the situation and discuss the possible consequences for the German financial sector and the financial markets, a Bundesbank spokesman said on request.
Doubts about interest rate hikes by the Fed
At the weekend, the US Treasury, the US Federal Reserve and the US Deposit Insurance Authority declared that deposits with the SVB and another institution would be protected. The US Federal Reserve also launched a new lending program to provide banks with liquidity.
Economists at US bank Goldman Sachs, led by Jan Hatzius, also expect recent events in the US banking system to prompt the Fed to pause its monetary tightening cycle next week. They also referred to the uncertainty about further interest rate hikes in the coming months. Concerns about the US banking system also pushed Japanese stock markets into the red on Monday. The Tokyo Nikkei index, which comprises 225 stocks, closed 1.1 percent lower at 27,833 points. The broader Topix index fell by 1.5 percent to 2001 points.
However, the protection of all deposits by the US Federal Reserve, the FDIC protection fund and the Treasury should stabilize investors over the long term, analysts said. "Stocks are likely to return to previous levels by Tuesday," said strategist Kazuo Kamitani of Japanese investment bank Nomura.