Global markets react to Credit Suisse deal as fears hit bank stocks

Treasury Secretary Janet Yellen on Thursday met privately in Washington with JPMorgan CEO Jamie Dimon before 11 banks agreed to deposit $30 billion in First Republic Bank to stabilize the teetering lender, according to two people familiar with the matter. 

The meeting served as a culmination of what had been a series of conversations over the last two days between Yellen and other US officials and leaders from some of the country’s largest banks as they sought a private sector lifeline for the battered California bank. 

Yellen had driven the effort from the government side, while Dimon led the effort to organize the bank executives that would eventually get behind the dramatic infusion of deposits. 

Yellen first conceived of the idea of the largest US banks coming together to direct deposits toward First Republic, according to a separate source familiar with the matter. The move was seen as critical to stabilizing the bank’s deposit base – but also a critical signal to financial markets about both the bank and the US financial system. 

The Federal Reserve loaned out $12 billion to banks this week from its new emergency lending facility, the Bank Term Lending Program, the Fed reported Thursday.

The new program was designed to prevent banks from failing like Silicon Valley Bank last week and Signature Bank on Sunday. As part of the facility, the Fed will loan banks money for up to a year in exchange for Treasury bonds or other high-quality assets that have crumbled in value during the Fed’s historic rate-hiking campaign.

The Fed will lend the banks the original value of their Treasury bonds, preventing them from selling assets at a loss (like SVB did) — a last-resort tactic to raise cash to pay customers’ withdrawals. That ignited SVB’s bank run last week.

America’s banks are sitting on more than $600 billion of unrealized losses from Treasury debt, according to the FDIC. So the Fed’s facility essentially negates that debt.

Although $12 billion is a lot, it pales in comparison to the nearly $152.8 billion banks borrowed from the Fed’s “discount window,” its more traditional lending facility, over the past week. Discount window loans absolutely ballooned from just over $4.5 billion in the prior week.

The Fed has steadily shrunk its balance sheet over the past year to fight inflation, but it added $300 billion to it over the past week. That demonstrates the seriousness of some bank’s cash concerns and the resolve of the Fed to alleviate them.

Stocks closed higher Thursday after a consortium of big banks said they would lend a hand in the regional bank crisis.

A group of big banks including JP Morgan Chase, Citigroup and Bank of America will provide $30 billion in deposits to First Republic after the bank’s shares plunged on the back of several bank collapses.

The news helped lift up big bank stocks, which have fallen in recent days.

Also alleviating investors’ fears was Credit Suisse’s announcement late Wednesday that it accepted a $53 billion lifeline from the Swiss National Bank for its own crisis, after shares of the Swiss lender tumbled.

The VIX, known as Wall Street’s fear gauge, was at about 23.1 after steadily ticking down throughout the trading session.

Investors are now positioning themselves for the Federal Reserve’s policy meeting next week. The European Central Bank raised its interest rate Thursday morning by half a point despite the banking turmoil, a decision the Fed will face on March 21-22. The CME FedWatch Tool shows a roughly 82% probability that the central bank will raise rates by a quarter point.

The Dow rose roughly 373 points, or 1.2%.

The S&P 500 gained about 1.8%.

The Nasdaq Composite climbed about 2.5%.

First Republic Bank, facing a crisis of confidence from investors and customers, is set to receive a $30 billion lifeline from a group of 11 large banks.

The major banks include JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Truist.

The infusion will give the struggling San Francisco lender much-needed cash to meet customer withdrawals and buttress confidence in the US banking system during a tumultuous moment for lenders.

First Republic’s stock, which was halted several times for volatility on Thursday, ended the session up 10%.

First Republic Bank, facing a crisis of confidence from investors and customers, is actively discussing options for a lifeline, people familiar with the matter said.

Some of America’s largest banks are in talks to inject billions of dollars into the struggling San Francisco lender, giving it additional financial firepower to meet customer withdrawals and boost confidence.

The consortium of big banks involved in providing the lifeline includes JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Truist, the people told CNN.

The lifeline is expected to total roughly $30 billion, one of the people said.

A First Republic spokesman declined to comment. 

US officials appear to be pleased with the prospect of an industry-led rescue of First Republic. The fact that America’s largest banks are discussing a lifeline for the San Francisco-based lender is a welcome sign of confidence in the strength of the banking system, a US official told CNN.

The official said such a rescue would complement actions that regulators have taken in recent days to safeguard deposits across the country.

First Republic Bank, facing a crisis of confidence from investors and customers, is actively discussing options for a lifeline, a person familiar with the matter told CNN.

Participating in the discussions Thursday are massive Wall Street banks, including JPMorgan Chase, Bank of America, Wells Fargo and Citigroup, the source said. A deal to prop up First Republic with much-needed access to cash could be announced as soon as Thursday.

A First Republic spokesman declined to comment to CNN. The talks were first reported by the Wall Street Journal.

First Republic’s shares were halted several times for volatility Thursday. The stock was last up 22% after plunging more than 30% earlier in the day.

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European stocks rebounded strongly Thursday afternoon, after falling back earlier in the day following an announcement by Europe’s central bank that it would hike its main interest rate by half a percentage point.

Europe’s benchmark Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, closed 1.2% up, while London’s bank-heavy FTSE 100 index finished the day 0.9% higher.

Both indexes had fallen back almost 1% and 0.16% respectively following the European Central Bank’s decision to press ahead with rate hikes to help bring down inflation.

Germany’s DAX also closed up 1.6%, and France’s CAC 40 finished 2% higher.

The increases tracked a similar rebound across the pond. The S&P 500 bounced 1.7% by early afternoon ET following reports that ailing regional bank First Republic is considering a takeover by larger lenders.

US tech investor Bradley Tusk told CNN that financial regulators are unprepared for bank runs in the age of social media.

Tusk, who was an early investor in Uber and Coinbase, says social media companies should work with regulators if they see sudden surges in online posts and mentions of banks. He told Julia Chatterley that this was a “no brainer.”

“Perhaps by finding out a little sooner, they can act faster, and that may help save a bank run,” he said.

Speaking more broadly about the impact of SVB’s collapse, Tusk said his venture capital business had its money stored at SVB, but insisted it was crucial to save the tech focused bank for wider economic reasons.

“If the Fed had let Silicon Valley Bank go down, half the start-ups in this country might have gone out of business,” he said. “Talk about a hit to the innovation economy.”

He added that his firm “had not written a check to a start-up since all of this happened” because they were dealing with the SVB crisis.

Republican Senator James Lankford grilled Treasury Secretary Janet Yellen Thursday on how the US government’s intervention in Silicon Valley Bank’s and Signature Bank’s collapses could encourage depositors to move their funds into large banks.

“What is your plan to keep large depositors from moving their funds out of community banks into the big banks? We have seen the mergers of banks over the past decade. I’m concerned you’re about to accelerate that,” the senator from Oklahoma said.

“That’s certainly not something that we’re encouraging,” Yellen responded.

Lankford also said smaller, community banks likely won’t receive the same help as SVB. The US government moved to insure deposits at SVB after the bank fell, sparking backlash from those who saw that intervention as a bailout.

“Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now?” Lankford said. “Will they get the same treatment that SVB just got, or Signature Bank just got?”

“The bank only gets that treatment if a majority of the FDIC board, a super majority of the Fed board and I in consultation with the president determine that the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences,” Yellen responded.

The current turmoil in the financial market means it could get tougher to purchase a home, particularly if government regulators like the Federal Reserve crack down on banks in the wake of SVB’s collapse. The Fed has also been on a historic rate-hiking regime to keep inflation in check, and most economists expect that to continue.

“If banks are under stress, they might be reluctant to lend,” Treasury Secretary Janet Yellen said Thursday in testimony to the Senate Finance Committee. “We could see credit become more expensive and less available.”

“That could turn this into a source of significant downside economic risk,” she added.

The banking meltdown over the past week leaves more questions than answers. The stunning collapse of two American banks and the loss of investor confidence in Credit Suisse led to wild market swings and put Wall Street on edge.

During CNN’s primetime special, “Bank Bust: Inside the Collapse of SVB,” experts weighed in on how to best understand what’s happening in a rapidly developing and confusing environment for financial institutions.

“On top of that, I think a lot of folks are feeling very concerned about, ‘Hey, if I’m saving up for a down payment, is a bank a safe place to put that money?’”

The 30-year fixed-rate mortgage averaged 6.73% in the week ending March 9. A year ago, it was 3.85%.

Freddie Mac is set to release its average weekly mortgage rates at 12 p.m. ET on Thursday.

Senate Banking Chairman Sherrod Brown praised the administration’s actions after Silicon Valley Bank collapsed, and insisted that their assistance was not a bailout.

“I think the Secretary of the Treasury and the Federal Reserve have generally done this well,” he said. “A bailout says taxpayers paid, no taxpayer — this is the banks. This is the assessment of the banks of paying up for more Federal Deposit Insurance Corp, right?”

“Taxpayers are not on the hook, period,” he said. “There would be no support for this if this were a taxpayer funded kind of thing.”

He added that his committee plans to hold oversight hearings as soon as next month. 

“We’re going to bring in the regulators, we are going to try to get the executives — and I’m sure they’re loading up with legal console to protect themselves, I don’t know if we’ll get them in or not, but we’re going to try,” said Brown. “We want the dust to settle a little from what happened and the fears to die down, as they mostly are.”

He added that they plan to focus on “not just what happened, but what the Federal Reserve is going to do, what Michael Barr is going to do, what the FDIC is going to do, what OCC and the other regulators are going to do at Treasury.”

The Blockchain Association, a nonprofit crypto advocacy group, said it is investigating firms’ allegations that they are being unfairly shut out from the mainstream banking system.

The allegations include instances of accounts being closed and banks refusing to open new accounts.

In a statement, BA said it is looking into alleged “actions by regulators that may have improperly contributed to the failures of Signature, Silicon Valley Bank, and Silvergate.”

Although crypto aspires to bring about a world without centralized banking authorities, the nascent industry still relies heavily on traditional lenders to bridge the gap between crypto platforms and fiat currency. Two of the three US banks that collapsed last week, Silvergate and Signature, catered heavily to crypto firms, leaving digital asset companies with far fewer friendly banks to turn to.

“These are lawful businesses in the United States and should be treated like any other law-abiding business,” said Blockchain Association CEO Kristin Smith.

The group said it has submitted requests to the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency, requesting documents and communications under the Freedom of Information Act.

The S&P 500 rebounded in midday trading on Thursday, as reports of potential support for ailing regional bank First Republic cheered weary investors. 

Still, markets have been volatile as the current meltdown in regional, and global, banks plays out.

The Volatility Index, or VIX, is sitting at an elevated 24.2, indicating increased fear in the market and large swings. The CNN Fear & Greed index is signaling that extreme fear continues to drive the market. 

If the S&P 500 swings lower in the volatile churn, there’s a key number to look out for, say Wells Fargo economists: 3,783. That would match the lowest level the index hit in December.

The major indexes typically trade up and down within a relative range, and investors don’t like when they break the lower threshold of that band.

“If the S&P 500 sells below the December low, it would probably trigger another round of selling by trend-following and momentum-driven strategies,” wrote the Wells Fargo economists in a note on Thursday. 

The good news is that the S&P 500 has a long way to 3,783 – more than 200 points. The index is currently trading around 3,936.

Prioritizing payments to cover only certain obligations would not avoid a US debt default, Treasury Secretary Janet Yellen told the Senate Finance Committee Thursday morning.

“Prioritization is effectively a default by just another name,” Yellen said, referencing a proposal floated by House Republicans.

The US hit its $31.4 trillion debt ceiling in January, forcing the Treasury Department to take extraordinary measures to allow the federal government to continue paying its bills in full and on time. A default could come over the summer or in early September, according to various analyses.

Yellen has repeatedly stressed the importance that Congress come together to address the borrowing cap as soon as possible.

But President Joe Biden and House Republicans are in a standoff over whether to include spending cuts in a debt ceiling measure.

The GOP-led House Ways and Means Committee last week advanced the Default Prevention Act, which would modify Treasury’s debt authority to allow it to continue to borrow to pay principal and interest on the public debt, as well as Social Security and Medicare benefits. It also directs Treasury to pay obligations related to the Department of Defense and veterans’ benefits before all others.

Yellen made it clear she does not agree with prioritization.

“It’s simply a recipe for economic and financial catastrophe to think we can pay some of our bills and not all of them,” she said.

Also, she said she cannot assure that the idea is feasible, noting there’s a reason why Treasury secretaries of both parties have rejected prioritization in the past.“

The government, on average, makes millions of payments each day, and our systems are built to pay all of our bills on time and not to pick and choose which bills to pay,” she said. “It would be an exceptionally risky, untested and radical departure from normal payment practices of agencies across the federal government.”

The US government intervened in the collapses of Silicon Valley Bank and Signature Bank to avoid contagion across the sector, US Treasury Secretary Janet Yellen testified Thursday before the Senate Finance Committee.

“One of the reasons we intervened and declared a systemic risk exception is because of the recognition there can be contagion in situations like this and other banks can then fall prey to the same kinds of runs, which we certainly want to avoid,” Yellen said.

The Biden administration moved Sunday to guarantee all deposits at Silicon Valley Bank after its collapse, in an effort to prevent tumult at the bank from spreading. The Federal Reserve also established additional funding for eligible financial institutions to prevent future bank runs.

“We tend not to see runs among insured depositors, but the liquidity requirements and needs of the bank with such high reliance on insured deposits that are runnable, I think we need to think about that,” Yellen said.

Democratic Senator Mark Warner on Thursday criticized the venture capitalists who raised alarm online about Silicon Valley Bank’s financial troubles and said that helped fuel the bank’s collapse.

“I think there were some bad actors in the VC community who literally started to spur this run by virtually crying fire in a crowded theater in terms of rushing these depositors out,” Warner said during US Treasury Secretary Janet Yellen’s testimony before the Senate Finance Committee.

SVB customers took out $42 billion in one day last week, leaving the bank with $1 billion in negative cash balance. Prominent venture capitalists, investors and startup leaders weighed in on the bank online on the day leading to the bank’s fall.

“This is not normally within the traditional banking regulatory, but I think this will go down as history’s first internet-driven run,” Warner said.

Mortgage rates dropped this week in the wake of several bank failures, reversing course after rising half a percentage point over the past month. But longer-term uncertainty is expected to hamper many homebuyers and keep the cost of buying unaffordable for many.

The 30-year fixed-rate mortgage averaged 6.60% in the week ending March 16, down from 6.73% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 4.16%.

After hitting a 2022 high of 7.08% in November, rates had been trending down. However, they started climbing again in February, rising half a percentage point over the past month. Robust economic data suggested the Federal Reserve is not done in its battle to cool the US economy and will likely continue hiking its benchmark lending rate. 

But that was before several banks collapsed over the past week. This led investors to flock to the safe haven of Treasury bonds, which pushed yields down and mortgage rates have followed.

“Turbulence in the financial markets is putting significant downward pressure on rates, which should benefit borrowers in the short term,” said Sam Khater, Freddie Mac’s chief economist.

US stocks rallied Thursday by mid-morning on reports that ailing US bank First Republic could be rescued by a consortium of large banks, including JPMorgan Chase and Morgan Stanley.

Shares of First Republic continued to plunge, despite the news, and are still trading 27.3% lower on the day. But shares of the SPDR S&P Regional Banking ETF (KRE) surged upward, briefly turning positive. The fund is currently trading down 0.3% for the day.

Swiss-traded shares of Credit Suisse, meanwhile, gained 18% after JPMorgan analysts suggested that the bank, which accepted a loan of up to $53 billion from the Swiss National Bank to “pre-emptively strengthen its liquidity,” could be taken over by UBS.

Wall Street traders appeared to brush off earlier fears of hawkish interest rate hikes at the Federal Reserve policy meeting next week. The European Central Bank surprised investors Thursday morning by hiking interest rates by an aggressive half point.

Investors in the US are still betting on an 80% chance of a quarter percentage point hike, according to the CME FedWatch tool. The odds for a half-point hike, they’re betting, are zero.

Investors were also listening in to Senate testimony from Treasury Secretary Janet Yellen at 10 a.m. ET. Yellen said the US banking system “remains sound” and that Americans’ bank deposits are secure.

First Republic Bank, facing a crisis of confidence from investors and customers, is actively discussing options for a lifeline – including a takeover, according to the Wall Street Journal.

Participating in the discussions Thursday are massive Wall Street banks, including JPMorgan and Morgan Stanley, the Journal reported. A First Republic spokesman declined to comment to CNN.

Both Fitch Ratings and S&P Global Ratings downgraded First Republic Bank’s credit rating on Wednesday on concerns that depositors could pull their cash from the bank. That sent shares plunging 26% Thursday, and the stock tripped several automatic circuit breakers designed to prevent shares from crashing.

First Republic’s problems reflect continued worries about the banking system in the aftermath of the collapse of Silicon Valley Bank and Signature Bank. Many regional banks, including First Republic, have large amounts of uninsured deposits above the $250,000 FDIC limit. Although not close to SVB’s massive percentage of uninsured deposits (94% of its total), First Republic has a sizable 68% of total deposits that are uninsured, according to S&P Global.

That had led many customers to exit the bank and put their money elsewhere.

First Republic on Sunday announced a deal with JPMorgan to gain fast access to cash if needed, and the bank then said it had $70 billion in unused assets that it could quickly use to pay customers’ withdrawals if needed.

On Thursday, as shares plunged, First Republic realized it needed more help, the Journal said. But a deal remains far from certain.

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Among the latest banking sector concerns on Thursday is the fate of First Republic, which is reportedly seeking a sale after its stock fell sharply earlier this week amid a credit downgrade and deposit worries. 

For First Republic customers — or any customers whose bank gets intensely scrutinized by investors in the coming days — you may be concerned about the safety of your money. But there’s no need, if your account balance is under $250,000 and your bank is insured by the Federal Deposit Insurance Corporation. If it is and your bank fails, the FDIC will guarantee you your money.

If you have more than $250,000 at your bank, you still may be fully covered if your money is spread against different types of accounts. For instance, if you have a joint account with your spouse you will each be covered up to $250,000, for a total of $500,000 in coverage on that account. Then, in addition, if you have your own individual savings or checking account, that will be insured separately up to $250,000.

Alternatively, if you have more than $250,000 at one bank, you could transfer the money above that threshold to new account or two at other FDIC-insured banks, ensuring no one account has more than $250,000 in it.

In any case, the recent failures of SVB and Signature banks in the past week and growing concerns over individual regional US banks is a good reminder to be aware of where your money is held.

“[It’s] is a wake-up call for people to always make sure their money is at an FDIC-insured bank and within FDIC limits and following the FDIC’s rules,” said Matthew Goldberg, a Bankrate analyst.

The FDIC has different resources on its site. The “bank suite” tool offers a list of FDIC-insured banking institutions and the Electronic Deposit Insurance Estimator calculates the insurance coverage of different deposit accounts at banks.

The New York Stock Exchanged halted trading in shares of First Republic Bank Thursday morning after the stock fell 26%.

Several large banks including JPMorgan and Morgan Stanley were reportedly in talks to rescue First Republic, according to the Wall Street Journal.

Trading resumed at 11:07 am ET.

Silicon Valley Bank’s liquidity issues led to its fall, US Treasury Secretary Janet Yellen said Thursday during testimony before the Senate Finance Committee.

“There was a run on the bank. It had high reliance on insured deposits. There was a massive withdrawal of deposits that led to a liquidity problem. The bank had to be closed for that reason,” Yellen said.

SVB and Signature Bank collapsed last week, sending shockwaves through the banking sector as regional bank customers rushed to withdraw their funds and the US government intervened to contain the panic.

“There was a liquidity risk in this situation. There will be a careful look at what happened in the bank and what initiated this problem. But clearly the downfall of the bank, the reason it had to be closed, was that it couldn’t meet depositors’ withdrawal requests,” Yellen said.

Shares in Europe’s banks were ticking slightly higher Thursday afternoon, recovering earlier losses following the European Central Bank’s decision to raise its main interest rate by half a percentage point.

Europe’s benchmark Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, fell 1% in afternoon trade following the ECB’s announcement, before recovering to trade up 0.8%. London’s bank-heavy FTSE 100 index initially fell 0.2%, but was trading 0.6% higher mid-afternoon.

Markets had been expecting the ECB to either pause or lower its rate hike to prevent further turmoil in banking stocks this week. But the central bank judged inflation to pose a bigger risk to Europe’s economy.

The European Central Bank (ECB) stuck with its plan to hike interest rates by half a percentage point Thursday, judging that inflation poses a bigger immediate threat to the economy than turmoil in the banking sector.

“The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area,” the ECB said in a statement.

“The euro area banking sector is resilient, with strong capital and liquidity positions. In any case, the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.”

The move will take the benchmark rate across the 20 countries that use the euro to 3%. The central bank has now hiked rates at six consecutive meetings since July by a combined 3.5 percentage points in a bid to get inflation under control.

“Inflation is projected to remain too high for too long,” the ECB said.

Some analysts had expected the Bank to opt for a smaller hike of a quarter percentage point to reduce the risk of adding further stress to markets. Banking stocks sold off sharply Wednesday as concerns about the sector’s resilience in the wake of Silicon Valley Bank’s demise spread beyond the United States.

The selloff, which dragged Credit Suisse to a new record low, culminated in the embattled lender accepting a loan from Switzerland’s central bank. The lifeline calmed panicked investors and boosted bank stocks Thursday.

US stocks fell Thursday amid ongoing concern about the banking sector and a rate hike decision from the European Central Bank.

Embattled Swiss lender Credit Suisse said that it would borrow $53 billion from the Swiss National Bank to “pre-emptively strengthen its liquidity” after its shares plunged Wednesday. Meanwhile, US federal regulators continue to grapple with how to prevent more fallout from the collapse of Silicon Valley Bank and Signature Bank.

The ECB said Thursday that it would raise the eurozone interest rate by a half point, a decision that could inform investors about the Federal Reserve’s own rate hike call next week. The CME FedWatch Tool shows a roughly 72% probability that the US central bank will raise rates by a quarter point.

Investors will also be listening in to Senate testimony from Treasury Secretary Janet Yellen at 10 a.m. ET. In prepared remarks, Yellen said the US banking system “remains sound” and that Americans’ bank deposits are secure.

Shares of US banks continued to get battered. Wells Fargo stock fell about 1.3%. Shares of JPMorgan Chase slipped 1.2%.

US home building climbed 9.8% in February from the previous month after five straight months of declines, according to data released Thursday from the Census Bureau. 

The Dow fell about 217 points, or 0.68%.

The S&P 500 slipped 0.6%.

The Nasdaq Composite declined 0.5%.

“The status quo is no longer an option” for embattled bank Credit Suisse, according to a JPMorgan, and the most likely endgame is a takeover by bank UBS.

The investment bank said in a note to investors Thursday that “ongoing market confidence issues” in Credit Suisse — rather than its capital position — had led to a record 24% fall in the lender’s stock Wednesday.

Credit Suisse said it would accept a 50 billion Swiss Francs ($53.7 billion) loan from the Swiss National Bank Thursday to help stay afloat, but JP Morgan said that liquidity injection may not be enough.

“We see a resolution scenario as most unlikely in our view and more likely… a takeover as the most likely scenario especially by UBS,” JPMorgan said.

Three days after US regulators stepped in to rescue the banking sector and two failed banks, Credit Suisse accepted a lifeline to restore confidence in the banking system. Although that calmed some nerves, markets remain extraordinarily volatile.

Focus has shifted again to: Who’s next? What’s the next domino to fall?

First Republic Bank is the consensus choice. Fitch Ratings and S&P on Wednesday both downgraded the bank’s credit rating over concerns that depositors could pull their cash despite federal intervention. The bank is reportedly exploring strategic options, including a sale, according to Bloomberg. (That’s Wall Street for: Help!) First Republic’s stock fell 28% in premarket trading.

On Thursday, Fitch Ratings put Western Alliance bank on notice, saying its credit rating could fall if customers continued to pull money out of the bank. Shares of Western Alliance, a regional bank like SVB, fell 10% in premarket trading. PacWest Bank fell 16%, and shares of other regional banks fell again, too. JPMorgan said in a note to clients that the Swiss central bank’s intervention was insufficient, and Credit Suisse will most likely need to be taken over.

In the meantime, concerns continue to shift from Credit Suisse to other parts of the banking industry.

The problems at Credit Suisse are “a reminder that as interest rates rise, vulnerabilities are lurking in the financial system,” said Neil Shearing, Group Chief Economist of Capital Economics.

Key areas to monitor, Shearing says: Smaller European banks, shadow banks and open-ended funds that might struggle under pressure from customers withdrawing money – and a boat-load of government bonds in their portfolios that have crumbled in value as rates have surged.

First-time claims for unemployment insurance fell to 192,000 for the week ended March 11, according to data released Thursday by the Department of Labor. 

That’s down 20,000 from the prior week’s revised total of 212,000.

Continuing claims, which are filed by people who have received unemployment benefits for more than one week, fell to 1.68 million for the week ended March 4, from a revised level of 1.713 million the week before.

Economists were expecting weekly claims to total 205,000 and continuing claims of 1.715 million. 

The steady level of weekly jobless claims, considered a proxy for layoffs, continues to show that companies are reluctant to let go of workers. While the Federal Reserve has been hoping for a softening of the labor market, it continues to prove remarkably resilient.

US home building jumped higher in February, turning around after five consecutive months of falling even as mortgage rates were climbing last month.

Housing starts, a measure of new home construction, rose by 9.8% in February from January. But that’s still down 18.4% from a year ago, according to data released Thursday by the Census Bureau. Starts in January rose to a seasonally adjusted annual rate of 1.450 million, up from the revised January estimate of 1.321 million.

Housing starts had big drops in May and July last year, when spiking mortgage rates pushed many prospective home buyers to the sidelines. Starts bounced back slightly in August, but have been falling since then.

Single‐family housing starts in February were up 1.1% from the revised January figure at a seasonally adjusted annual rate of 830,000.

As mortgage rates trended lower from November through January, builders have begun to feel more optimistic that conditions may improve in 2023. But recent strong economic data and uncertainty in the banking sector mean that inflation concerns remain, along with volatile mortgage rates.

Building permits, which track the number of new housing units granted permits, jumped up in February for the second month in a row, rising 13.8% from the revised January rate, and were down 17.9% from a year ago. In February building permits were at a seasonally adjusted annual rate of 1.524 million.

US stock futures are indicating a mixed open this morning as growing concern about the global banking sector and the Federal Reserve’s upcoming rate hike decision weigh on investors.

Futures tied to the Dow were down 70 points, or 0.2%, S&P 500 futures were 0.1% lower and Nasdaq Composite futures were up 0.3%.

The ongoing problems in the banking sector continue to weigh on investors in both the US and Europe. Still, US-listed shares of the beleaguered megabank Credit Suisse shot up nearly 5% in pre-market trading after the company announced that it would borrow up to $54 billion from the Swiss National Bank to assure liquidity and restore confidence in the bank. Shares of Credit Suisse fell 14% on Wednesday.

The largest banks in the US – JP Morgan, Citigroup, Wells Fargo and Bank of America – also appeared to recover pre-market after a choppy day of trading yesterday.

Regional banks, however, continued to suffer following the collapses of Silicon Valley Bank and Signature Bank. Shares of First Republic Bank were down nearly 30% in pre-market trading after Fitch Ratings and S&P on Wednesday downgraded the bank’s credit rating on concerns that depositors could pull their cash despite federal intervention. Bloomberg reports that the bank is considering a number of strategic options, including a possible sale.

Western Alliance Bancorporation was down 11% pre-market and the SPDR S&P Regional Banking ETF (KRE) was down 1.2%.

Wall Street is now anxiously awaiting next week’s Federal Reserve policy decision where investors largely expect a quarter percentage point rate hike, according to the CME FedWatch tool.

Investors will also closely watch Treasury Secretary Janet Yellen for information about the state of the banking sector as she testifies before Senate today at 10 a.m. ET.

US officials have seen limited systemic risk exposure from the teetering European bank Credit Suisse and view the bank’s issues as separate and apart from the failure of Silicon Valley bank, despite US bank stocks taking a beating in the market as anxiety continues to grip the industry.

Treasury Department officials spent the day yesterday in constant conversations with their Federal Reserve and European counterparts as they attempted to gauge the risks posed by the long-troubled Swiss lender – and the US exposure to the bank, people familiar with the matter said.

US officials are closely watching the market reaction to the announcement that Credit Suisse would borrow up to 50 billion Swiss francs ($53.7 billion) from the Swiss National Bank to see if it stabilizes the broader anxiety that ripped through the sector Wednesday.

While officials acknowledged the volatile moment – and the reality that broader fears could create significant problems in and of themselves — they continue to see signs that their dramatic emergency intervention last weekend is still showing signs of taking hold.

Fitch Ratings warned investors that Western Alliance, a regional bank caught up in the SVB fallout, could get downgraded.

Western Alliance has cash reserves of $25 billion, equivalent to approximately 47% of total deposits, Fitch noted. The bank has said withdrawals have been “moderate” since the SVB failure, and insured deposits make up more than half of total deposits. That, and the Fed’s new lending facility, are positive signs, Fitch said. But stress in the marketplace continues to threaten the company’s liquidity.

Shares of Western Alliance tumbled 11% in premarket trading Thursday.

The credit rating agency is the latest to downgrade or threaten a downgrade of a regional bank’s credit. Fitch and S&P Global Ratings downgraded First Republic Bank’s credit rating Wednesday on concerns that depositors could pull their cash despite federal intervention to restore faith in the banking sector.

Moody’s Investors Service on Tuesday cut its outlook for the entire US banking sector and placed six US banks on review for potential credit rating downgrades, including Western Alliance.

Federal regulators are stepping up their oversight of the banking industry following the stunning collapse of Silicon Valley Bank.

“In times like these, the OCC engages in heightened monitoring and coordinates with other regulatory agencies in the US and globally to ensure that the federal banking system remains a trusted source of strength to consumers, businesses and communities,” a spokesperson for the Office of the Comptroller of the Currency said in a statement. 

The OCC did not detail what that intensified monitoring looks like. 

The increased oversight comes as regulators face questions about how they missed red flags about Silicon Valley Bank before it became the second-biggest bank failure in US history. 

The Federal Reserve has launched a review of the regulation and oversight of the California lender, with Fed Chair Jerome Powell calling for a “transparent and swift” examination of what happened.

“The OCC remains committed to ensuring that national banks remain safe and sound, provide fair access to financial services and treat customers fairly,” the OCC spokesperson said. 

Treasury Secretary Janet Yellen says US officials have taken “decisive and forceful” actions to bolster confidence in the banking system and stressed that Americans’ bank deposits are safe.

“Our banking system remains sound,” Yellen said in prepared remarks to be delivered on Thursday during a hearing before the Senate Finance Committee.

“Americans can feel confident that their deposits will be there when they need them,” Yellen said. “This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe.”

The Treasury Department, Federal Reserve and FDIC took extraordinary steps on Sunday, promising that the uninsured depositors at Silicon Valley Bank and Signature Bank will be made whole after those lenders failed.

“On Monday morning, customers were able to access all of the money in their deposit accounts so they could make payroll and pay the bills,” Yellen said.

Yellen pointed out that shareholders and debtholders of the banks are not being protected by the government and no taxpayer money is being used or put at risk.

Beyond the banking crisis, Yellen touted historically low unemployment and booming business creation.

“We have seen some moderation in headline inflation, but more work needs to be done,” Yellen said. 

Growing stress in the banking sector has boosted the odds of a recession within the next 12 months, Goldman Sachs said in a note to investors Wednesday.

Goldman now believes that America’s economy has a 35% chance of entering a recession within a year, up from 25% before the banking sector meltdown started a week ago.

But the near-term prospects for the US economy remain strong. Goldman’s business survey trackers indicate the economy grew slightly in February, and sales are expected to increase 3% across industries during the current quarter.

Jobs remain plentiful and although the layoff rate has ticked slightly higher, Goldman said it remains historically low. Wage growth is slowing as the Federal Reserve continues to hike rates to cool off the economy, but paychecks are still getting larger – and inflation isn’t close to normal, Goldman said.

The Swiss National Bank (SNB) bank has confirmed that it will provide liquidity to Credit Suisse, as requested.

The Zurich-based lender had asked the central bank for a $53 billion loan after its shares plunged more than 24% on Wednesday.

Confirming that the liquidity will be provided “against sufficient collateral,” the Swiss central bank said, “within the framework of its statutory mandate, the SNB (Swiss National Bank) may provide liquidity to a domestic bank against collateral.”

Brent crude oil prices ticked up 1% Thursday to hit $74 a barrel as markets cheered an announcement by Credit Suisse that it would accept a 50 billion Swiss Franc ($53.7 billion) loan from Switzerland’s central bank “to pre-emptively strengthen its liquidity.”

But compared with last Friday, Europe’s benchmark oil price is still down 10%.

Investors have been on edge over whether the collapse of Silicon Valley Bank in the United States could spark a banking crisis that would hurt the global economy.

West Texas Intermediate crude, the reference point for US oil prices, rose 0.8% in pre-market trade.

“Banking malaise has sparked worries about longer-term fortunes for the EU and US economies, particularly if financial institutions become more risk-averse in lending,” Susannah Streeter, head of money and markets at investing platform Hargreaves Lansdown, said in a Thursday note.

Credit Suisse raised alarm bells after revealing it needs a lifeline to stay afloat — one it has now accepted from the Swiss central bank.

But the Zurich-based lender’s struggles sent global markets into a tizzy on Wednesday after acknowledging “material weakness” in its financial reporting, scrapping bonuses for top executives and being denied further investment from its biggest shareholder, the Saudi National Bank.

Here’s what you need to know

New deal: Credit Suisse agreed to borrow more than $50 billion from Swiss National Bank after its shares plunged as much as 30% Wednesday in its biggest one-day drop ever. The crash came a month after a historic loss for the bank, and spilled over into other European banking shares, with French and German lenders such as BNP Paribas, Societe Generale, Commerzbank and Deutsche Bank falling Wednesday. Italian, UK and US banks also slumped.

Chinese bank stocks advanced but other Asian stocks sank: Troubles at Credit Suisse are reigniting concerns about even some of the world’s biggest financiers, which comes just days after the collapse of Silicon Valley Bank. So here’s how markets are doing today:

Credit Suisse shares also surged: In the opening minutes of trading, Switzerland’s second-largest bank’s stock was up more than 30%. On Wednesday the bank plunged more than 24% to a record low after its biggest shareholder said it had no plans to give any more funds to Credit Suisse.

Shares in Credit Suisse have surged in the opening minutes of trading after it agreed a $53 billion loan from the Swiss central bank.

Switzerland’s second largest bank was up more than 30% in early trade.

On Wednesday the bank plunged more than 24% to a record low after its biggest shareholder said it had no plans to give any more funds to Credit Suisse.

Overnight the Swiss central bank and the Swiss regulator said they were ready to provide financial support to Credit Suisse, and the bank took up the offer, saying the loan was a “decisive action to pre-emptively strengthen its liquidity.”

Europe’s main markets have opened higher after moves from the Swiss central bank reassured investors over the financial health of Credit Suisse.

In the opening minutes of trade the UK’s FTSE 100 was up more than 1% and the French CAC 40 was up 1.5%. 

Switzerland’s second largest bank has agreed to a $53 billion loan from the Swiss central bank, saying it was a “decisive action to pre-emptively strengthen its liquidity.”

You may hear economists and market analysts reference “moral hazard” when discussing the past weekend’s rescue of two US banks, Silicon Valley Bank and Signature.

“Moral hazard” is somewhat academic shorthand for the idea that banks (or other entities) will take on more risk if they believe that they will ultimately be bailed out.

For example, some argue that SVB should have been allowed to fail — that the pain of the fallout would outweigh the downsides of customers losing their money and startups going out of business.

Of course, others note that the risk of letting the 16th-largest US bank collapse, and potentially letting its tech industry customers also fail, could have far-reaching and potentially devastating consequences.

The banking meltdown over the past week has left us with more questions than answers. The stunning collapse of two American banks and the loss of investor confidence in Credit Suisse led to wild market swings and put Wall Street on edge.

During CNN’s primetime special, “Bank Bust: Inside the Collapse of SVB,” experts weighed in on how to best understand what’s happening in a rapidly developing and confusing environment for financial institutions.

After Silicon Valley Bank failed on Friday, its customers were filled with fear. But by Monday, they could breathe a sigh of relief — the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation had said over the weekend that each customer would be made whole, even beyond the $250,000 insured by the FDIC.

While it was welcome news for account holders, the extraordinary move raised questions for some, who wondered why the FDIC bent its rules for SVB and its customers.

“I do think there’s a little bit of moral hazard here,” said Lynette Khalfani-Cox, CEO of AskTheMoneyCoach.com, referring to the idea that banks will take on more risk if they think they’ll get bailed out.

As to why the FDIC made the decision it did? The Federal government didn’t want SVB’s failure to “have a domino effect,” Khalfani-Cox said. “Federal regulators deemed them to be in the category of ‘systemic risk,’ so they granted an exemption.”

Asian markets pared some losses on Thursday after Credit Suisse said it would borrow up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank, as it seeks to reassure investors it has the necessary cash to stay afloat.

But Ryan Patel, a senior fellow at the Drucker School of Management at Claremont Graduate University, said the “panic” over the Swiss banking giant isn’t going away anytime soon.

“People will be asking about the stability of their own banks, questioning the system of regulations, Patel told CNN’s Kim Brunhuber. “Rightfully so, because if you think about here in the US, the second-longest run between no bank failures — guess what? — since 1933 was the Silicon Valley Bank.”

The failure last week of Silicon Valley Bank and Signature, two much smaller regional lenders, shook investor confidence around the world. Some analysts have even compared SVB to Bear Stearns, the first lender to collapse at the start of the 2007-2008 global financial crisis.

However, Patel said regulations imposed on the banking sector after 2008 should be enough to prevent a repeat of the global financial crisis.

Some analysts are calling China a “safe harbor” amid the turmoil.

In Shanghai, the nation’s biggest state-owned lenders all rallied.

Bank of China was up 2.7%. Agricultural Bank of China and ICBC both gained 1.6%. China Construction Bank and Bank of Communications added 1.3% and 0.6%, respectively.

In Hong Kong, Bank of China rose 1%. Agricultural Bank of China was up 0.7%, and Bank of Communications edged 0.2% higher.

Jefferies analysts said Wednesday that China could be a “safe harbor” for investors as the country’s economy is “undoubtedly in a recovery.” The latest economic data from January and February confirmed a rebound is on track, they said.

On the same day, Goldman Sachs raised its forecast for China’s GDP growth to 6% in 2023, up from 5.5% previously. It’s their second upgrade this year.

They cited China’s “rapid reopening” after three years of Covid restrictions and solid economic data from the first two months of this year.

“Chinese firms continue to benefit from favourable tailwinds,” said Marty Dropkin, head of equities for Asia Pacific at Fidelity International, adding that it’s “good news” for Chinese equities and China’s trading partners. 

It’s hard to overstate how big of a deal it would be for Credit Suisse — with its half-a-trillion dollars in assets and more than 50,000 employees around the world — to collapse.

The failure last week of Silicon Valley Bank and Signature, two much smaller regional lenders, shook investor confidence around the world.

Credit Suisse, one the largest lenders in Europe, is “much more globally interconnected, with multiple subsidiaries outside Switzerland, including in the US,” wrote Andrew Kenningham, chief Europe economist at Capital Economics.

Credit Suisse is known as a “global systemically important bank,” (or “G-SIB,” as the cool kids call it).

Once one of those mega-banks is in trouble, people start to wonder what’s going on with the system and speculate about who might be the next to fall.

Even with a financial lifeline from Swiss authorities, there are still plenty of risks and unknowns radiating out from Credit Suisse, keeping investors on edge.

Credit Suisse turmoil indicates the crisis has not been contained, according to Arthur Wilmarth, professor at the George Washington School of Law.

“I think it was naive for most people to think that it might be contained just with a couple of regional banks, because clearly there are still shocks reverberating within our own banking system,” Wilmarth said. “And this would indicate that it could potentially spread to banks of a very large size.”

Read more here.

Credit Suisse has been dogged by problems for years. In fact, it faced rumors of a potential collapse as recently as late last year.

In October, social media chatter that the Swiss bank was on the brink of going bust sent shares on a wild ride.

It also appeared to cost the firm dearly: Customers withdrew 111 billion Swiss francs ($121 billion) in the final three months of 2022 amid the speculation.

Credit Suisse has since embarked on a massive turnaround plan that will see it slash 9,000 full-time jobs by the end of 2025. The firm will also spin off its investment bank and focus more on wealth management.

But last month, the Zurich-based lender reported its biggest annual loss since the financial crisis in 2008, highlighting the scale of the challenge it continues to face.

It lost 7.3 billion Swiss francs ($7.9 billion) in 2022, compared to a loss of 8.2 billion Swiss francs ($8.9 billion) in 2008.

The dismal results followed a series of missteps and compliance failures that have already cost the bank dearly.

For example, the collapse of US hedge fund Archegos Capital Management, a client of Credit Suisse, in 2021 cost the bank $5.5 billion. An independent external investigation later found “a failure to effectively manage risk.”

Last year, the bank’s chairman also resigned following an investigation commissioned by the board that reportedly looked at claims that he broke Covid-19 rules. The inquiry was said to focus on conduct including travel and his personal use of corporate aircraft.

The bank’s reputation has also been marred by a spying scandal in recent years, which ultimately led to the resignation of its former CEO and COO.

New deal: Credit Suisse said Wednesday it would borrow up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank, as it seeks to reassure investors it has the necessary cash to stay afloat. Investors sent shares in the country’s second biggest lender crashing by as much as 30% Wednesday.

US stock futures ticked up slightly early Thursday morning, suggesting signs of a rebound when markets open for regular trade.

Dow futures rose 0.3%. S&P 500 futures pointed up 0.4%, while Nasdaq futures gained 0.5%.

The moves followed a tense day on Wall Street, sending US stocks mostly down as investors fretted over the outlook for global banking.

The Dow closed down nearly 0.9%, while the S&P 500 fell about 0.7%. The Nasdaq Composite, meanwhile, moved up 0.05%.

Reporting from Tokyo, CNN Correspondent Marc Stewart says there are hopes that Credit Suisse’s announcement that it would accept funding from the Swiss central bank could return markets to stability.

Credit Suisse said Wednesday it would borrow up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank, as it seeks to reassure investors it has the necessary cash to stay afloat.

Even as most Asian shares remain in the red on Thursday, the news seems to have put a floor under the most severe losses.

So what is causing investors to be so jittery?

“Well, Credit Suisse, for one thing, has had a history of troubles in the past,” Stewart said.
“If we look into the United States, banks there are dealing with very high interest rates. High interest rates, at least in the US, make credit card statements more expensive, make auto lending more expensive. It also makes it more expensive for the way that banks do business, and that creates some concern.”

The banking meltdown over the past week has left us with more questions than answers. The stunning collapse of two American banks and the loss of investor confidence in Credit Suisse led to wild market swings and put Wall Street on edge.

During CNN’s primetime special, “Bank Bust: Inside the Collapse of SVB,” experts weighed in on how to best understand what’s happening in a rapidly developing and confusing environment for financial institutions.

CNN’s chief business correspondent Christine Romans says this is not a repeat of the 2008 global financial crisis, because banks aren’t carrying toxic assets.

“They’re not allowed to anymore,” Romans explained. “They don’t have all that garbage, that junk on their balance sheets anymore. They have to have better capital set aside, and the big banks have to undergo stress tests.”

However, Romans noted that smaller banks like SVB don’t face quite the same regulatory scrutiny as their larger peers.

“The verdict is out on the controversy about whether some of these smaller banks were allowed to not partake in all of the … regulations, and maybe that left them more exposed,” Romans said.

Some context: Those regulations passed in the wake of the Great Recession laid out stricter rules for the banking industry. But small and mid-sized banks — those with assets below $250 billion, like SVB — were exempted from some of the rigorous capital requirements applied to larger institutions, and from the obligation to undergo tests of their ability to withstand financial stress by the Federal Reserve each year.

The banking meltdown over the past week has left us with more questions than answers. The stunning collapse of two American banks and the loss of investor confidence in Credit Suisse led to wild market swings and put Wall Street on edge.

During CNN’s primetime special, “Bank Bust: Inside the Collapse of SVB,” experts weighed in on how to best understand what’s happening in a rapidly developing and confusing environment for financial institutions.

Former Treasury Secretary Larry Summers told CNN that despite scary headlines, now is not the time for consumers to panic.

“I don’t think this is a time for panic or alarm,” Summers said. “This is not 2008, where people needed to be worried about where they could get their money…It absolutely is not that.”

Banking stocks in Asia fell on Thursday, dragging the broader markets lower, as troubles at Credit Suisse sparked fears that banking turmoil is spreading around the world.

News that the beleaguered megabank has taken up the Swiss central bank’s offer of financial support in order to stay afloat has limited the worst of the losses.

The lender said it would borrow up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank. Investors sent shares in Switzerland’s second biggest lender crashing by as much as 30% Wednesday.

The bank called the loan a “decisive action to pre-emptively strengthen its liquidity.”

Japan’s Topix Banks Index, a key index that tracks Japanese lenders, tumbled as much as 6.4% in the morning session. It then trimmed some losses and was last trading 3.7% lower. The index has lost more than 8% so far this week.

In Hong Kong, Standard Chartered (SCBFF) sank nearly 4%. HSBC Holdings (HSBCPRA) dropped 2.5%. Local bank BOC Hong Kong was down 3.1%.

In South Korea, major lenders Shinhan Financial Group and KB Financial Group declined 1.2% and 0.5% respectively.

“What we are seeing is a definite unravelling of investor confidence across both the tech and banking sectors,” said Clifford Bennett, chief economist at ACY Securities, a Sydney-based online broker. “It is highly unlikely these concerns are going to simply vanish any time soon.”
“Regardless of balance sheets, a loss of confidence by investors and depositors can bring down any bank,” he added.

Read more here.

Hours after the Swiss central bank said it was ready to provide financial support to Credit Suisse, the beleaguered megabank took it up on the offer, hoping to reassure investors that it had the necessary cash to stay afloat.

Credit Suisse said it would borrow up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank. Investors sent shares in the country’s second biggest lender crashing by as much as 30% Wednesday.

The bank called the loan a “decisive action to pre-emptively strengthen its liquidity.”

“This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” the bank said in a statement.

In addition to the loan from the central bank, Credit Suisse also said it repurchased billions of dollars of its own debt to manage its liabilities and interest payment expenses. The offer covers $2.5 billion of US dollar bonds and €500 million ($529 million) of euro bonds.

The venerable but troubled bank, founded in 1856, is one of the biggest financial institutions in the world and categorized as a “global systemically important bank,” along with just 30 others, including JP Morgan Chase, Bank of America and the Bank of China.

Read more here.

Nervous bank customers have rushed to the safety of big banks in the wake of a pair of high-profile bank failures that have shaken confidence in the system.

Bank of America, Wells Fargo and Citigroup have all experienced a significant increase in deposits since Silicon Valley Bank ran into trouble last week, people familiar with the matter tell CNN.

Small and regional banks have suffered deposit outflows, though a senior Treasury official told CNN earlier this week that those customer withdrawals have eased.

The situation is fluid and it’s not clear just how much money has been plowed into big banks, though the sum is likely to be in the billions or tens of dollars. 

Stocks closed mostly lower on Wednesday as investors grappled with the crash of Credit Suisse stock and how the fallout could affect global and domestic markets.

Troubles at the systemically important Swiss lender come as markets struggled to make sense of the collapse of Silicon Valley Bank and Signature Bank.

The Swiss National Bank said Wednesday said that it will provide Credit Suisse with liquidity if necessary, after shares tumbled as much as 30%.

Shares of the bank closed down 24%.

Major US banks continued to get hammered. Shares of Wells Fargo fell 3.2%. JPMorgan Chase stock dropped 4.7%.

The Dow fell roughly 280 points, or 0.87%.

The S&P 500 fell about 0.7%.

The Nasdaq Composite inched up 0.05%