One of the biggest stories of the month has been the failure of two large banks, Signature Bank and Silicon Valley Bank. People with money at First Republic Bank also had concerns that this bank could potentially have some troubles. You can find a timeline of the important financial events of the month in the article below and see how this year March Madness also came to the banks.
March Madness Timeline for the Banks
March is the month for the NCAA college basketball tournament called “March Madness”. This year March Madness also came to the banks with a very unusual and stressful month in the financial industry for both U.S. and European banks which led to the failure of 2 large banks. Investor concerns spread to the entire banking system and there were significant swings in the prices of bank stocks throughout the month.
Here is the timeline of some of the key events in the financial sector during March1:
- March 8: Silicon Valley Bank announced it would book a $1.8 billion loss, mostly of long duration U.S. Treasuries, that they had to sell at a loss to cover increasing withdrawals. They said they planned to raise $2.25 billion by selling common and preferred stock. A few hours later Moody’s downgraded Silicon Valley Bank’s parent company, SVB Financial.
- March 9: SV Bank’s stock crashed when the market opened. Shares of the four biggest banks in the U.S. fell as investors feared that other banks could soon be having troubles. As panic spread through texts and social media, venture-capital firms began pulling their money out in large amounts. By the time Silicon Valley Bank closed for business that day, depositors attempted to withdraw $42 billion.
- March 10: The trading of the shares of SVB Financial was halted after a Friday morning premarket selloff. Then federal regulators announced they had taken control of the bank before it opened. This was the second largest bank failure in U.S. history, only after Washington Mutual’s collapse during the height of the 2008 financial crisis.
- March 12: Federal regulators announced that they had taken control of a second bank, Signature Bank, making it the third largest bank failure in U.S. history. Regulators said that customers of both banks would get all their money back and they announced a new lending program for banks.
- March 11-12: Over the weekend, tech startups that had most, or all their money, in Silicon Valley Bank, scrambled to line up funding so they could pay their employees in the days ahead.
- March 13: President Biden held a televised address to reassure the American public that the financial system is safe. Meanwhile, during the day, the shares of First Republic Bank and other regional stocks continued to drop.
- March 15: Concerns about the U.S. financial system spread to Europe and shares of Credit Suisse Group hit new lows, while other European bank stocks also started to slide. S&P Global Ratings downgraded First Republic’s credit rating to junk status, and this increased outflows of money from the customers of First Republic to other banks.
- March 16: Janet Yellen met with the heads of the largest U.S. banks and convinced them to deposit money in First Republic. Federal regulators announced that 11 banks have deposited $30 billion in First Republic to help stabilize this shaky bank.
- March 17: Silicon Valley Bank’s parent company filed for chapter 11 bankruptcy protection.
- March 19: UBS agreed to take over rival Credit Suisse for a much-reduced price of $3 billion, in a deal engineered by the Swiss regulators.
- March 21: Treasury Secretary Janet Yellen said the federal government could step in to protect depositors at additional banks if regulators see a run on the banking system.
- March 24: There was a selloff in the shares of Deutsche Bank and raised concerns about one of Europe’s largest banks.
- March 27: The FDIC announced that First Citizens BancShares will acquire the bulk of the assets from Silicon Valley Bank.
Federal Reserve Perspective
The Federal Reserve met on March 21-22. Some analysts thought that the issues with the financial system might cause them to pause their interest rate hikes, yet that was not the case. Federal Reserve Chairman Powell announced on March 22 that they would continue raising interest rates and they raised the Fed Funds interest rate by 0.25% increasing the Fed Funds Rate to 4.75%. They stated that the financial system remains strong but continue to have concerns that inflation is too high at about 6 percent year over year in February. Hence, their reasoning as to why raising interest rates was appropriate.
Where Do We Go From Here?
We are monitoring the situation closely with banks and the financial system. Things seem to have stabilized for the moment. There are still some issues with First Republic Bank, and we have spoken with the small number of our clients with assets there and are guiding them through next steps.
If you have further questions or concerns about any of these issues, call your Wealth Manager.
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Our Financial Journey Partners office is based in San Jose, California. We have clients that live in many states across the country. If you have questions about your investments or financial situation, call us to schedule time to talk about your specific situation.
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1 Wall Street Journal - The Banking Crisis: A Timeline of Silicon Valley Bank’s Collapse and Other Key Events