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The Fed lent banks a record $153 billion from its discount window last week, the last-resort facility banks use when they have trouble accessing cash.

That shows how much strain is on the banking system at the moment.

"The sharp increase in banks’ emergency borrowing from the Fed's discount window speaks to the funding and liquidity strains on banks, driven by weakening depositor confidence following one bank winddown and two bank failures," said Jill Cetina, Moody's analyst, in a note to investors.

But Moody's, like federal regulators, noted there's nothing inherently wrong with the global banking system. None of the banks that borrowed from the Fed's discount window borrowed on secondary credit terms -- emergency, overnight loans that help deeply troubled banks keep the lights on. Those loans come with severe restrictions and more oversight from the Fed.

The fact that the loans the Fed delivered were primary credit "indicates that US bank supervisors consider the banks that needed emergency support 'healthy' and not at elevated risk of imminent failure," Moody's noted.

Fitch Ratings warned on Friday it could still downgrade First Republic’s credit rating even after the regional bank landed a $30 billion lifeline from big banks.

The ratings company said First Republic remains on rating watch negative despite the $30 billion industry-led rescue. Fitch and S&P Global Ratings both downgraded First Republic’s credit rating earlier this week.

Fitch said it still views First Republic’s franchise and liquidity profile as “significantly weakened” since early last week when stress emerged in the banking industry.

Fitch said it will continue to assess the situation and plans to take rating action on First Republic within the next few business days. The ratings firm said it continues to monitor the bank’s funding and liquidity profile to “assess the stability of the customer deposit base” and the impact of the rescue.

Shares of the San Francisco-based bank are tumbling 20% in premarket trading Friday morning.

Americans' optimism about the economy dropped in March for the first time in four months, according to a closely watched survey released Friday by the University of Michigan.

The preliminary consumer sentiment index fell to 63.4 this month from 67 in February, the university reported Friday.

Economists were expecting it to hold at 67, according to consensus estimates on Refinitiv.

Around 85% of the survey was conducted prior to the turmoil in the banking sector, said Joanna Hsu, director of the university's Surveys of Consumers, in a statement.

Hsu noted the limited impact of the current banking crisis on consumer sentiment, telling Bloomberg TV Friday morning that "there aren't enough consumers paying attention to that" yet.

Year-ahead inflation expectations also fell, declining to 3.8%. That's the lowest reading since April 2021, down from 4.1% in February but well above the pre-pandemic average range of 2.3-3.0%.

However, "with ongoing turbulence in the financial sector and uncertainty over the Fed’s possible policy response, inflation expectations are likely to be volatile in the months ahead," Hsu said.

The Supervisory Board of the European Central Bank is holding an unscheduled meeting Friday to discuss the turmoil in European bank stocks over the past week triggered by the collapse of two US banks and fears over Credit Suisse.

The Supervisory Board, which oversees Europe’s banking system, "is meeting to exchange views and to provide members with an update on recent developments in the banking sector,” an ECB spokesperson told CNN. The gathering follows a similar ad hoc meeting earlier this week, Reuters reported.

The Supervisory Board holds scheduled meetings every three weeks on the ECB’s supervisory tasks, as opposed to its duties related to setting interest rates.

“Central banks and regulators have reacted swiftly to the concentrated problems in the US and European banking systems during the past week,” economists at Berenberg wrote in a note Friday.“This suggests that it remains highly unlikely that the current turmoil will be allowed to morph into a 2008-style systemic crisis. Still, the fallout will echo through the global financial system as banks turn more cautious for a while … Financial conditions will likely be tighter for a while. This will have consequences for the real economy.”

Stocks opened lower on Friday as investors continued questioning how the banking sector will recover from the recent turmoil.

SVB Financial Group, the firm that owned Silicon Valley Bank, filed for Chapter 11 bankruptcy protection on Thursday.

Shares of First Republic fell roughly 16% after tumbling over 19% in extended hours, despite a group of banks swooping in to offer the bank $30 billion in deposits Thursday.

Shares of Credit Suisse fell about 9% as investors remained unconvinced about the Swiss lender's stability. Reports of a possible takeover from UBS or the government heightened the uncertainty around the bank.

Ahead of the Federal Reserve policy meeting on Tuesday and Wednesday, Wall Street sees a roughly 72% probability that the central bank will hike rates by a quarter point, according to the CME FedWatch Tool.

Traders are also awaiting the latest sentiment survey from the University of Michigan, a leading gauge of consumers’ attitudes toward the current and future strength of the economy.

The Dow fell 182 points, or 0.6%.

The S&P 500 slipped roughly 0.1%.

The Nasdaq Composite declined 0.02%.

SVB Financial Group, the company that owned the failed Silicon Valley Bank until the US government took it over last week, has filed for Chapter 11 bankruptcy protection.

Silicon Valley Bank was not included in the bankruptcy filing in New York on Friday. Also not included in the Chapter 11 process are venture capital company SVB Capital and broker-dealer business SVB Securities, which will remain operational.

Trading of the company's stock has been halted since Thursday, and a bankruptcy was largely expected.

"The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets, especially SVB Capital and SVB Securities," said William Kosturos, chief restructuring officer for SVB Financial Group, in a statement. "SVB Capital and SVB Securities continue to operate and serve clients, led by their longstanding and independent leadership teams."

SVB Financial said it had $3.3 billion in unsecured debt and $3.7 billion in stock that could get wiped out in the bankruptcy.

Governments around the globe are stepping in with extraordinary rescue plans to keep the banking system stable. It's not yet clear if they're succeeding.

US regulators orchestrated a $30 billion cash infusion into First Republic Bank, a regional bank with a similar profile to the failed Silicon Valley Bank. That calmed nerves late Thursday. But First Republic's stock was down another 14% Friday in premarket trading. Other regionals, including Western Alliance and PacWest were also lower, and Reuters reported that PacWest was working to get a deal similar to First Republic's.

Meanwhile, investors remained skeptical of Credit Suisse's ability to stay afloat. The stock fell another 5% in morning trade, as rumors of a takeover -- either by UBS or the government -- continued to swirl.

The chaos spread to China, whose central bank made a surprise cut to the amount of money that banks must keep in reserve, an effort to keep money flowing through the financial system.

Regulators continue to insist that the banking system is stable. But the Federal Reserve loaned out $150 billion to banks last week, including $12 billion in its new emergency lending program. We're nowhere close to what banks were borrowing during the global financial crisis -- but that's still a lot of money.

"The glass half-empty view is that banks need a lot of money," said JPMorgan's Michael Feroli in a note to investors. "The glass half-full take is that the system is working as intended."

We'll watch closely to see if more banks fail Friday after the market close. This has proven to be a volatile situation, and emotion can turn on a dime.

China’s central bank has made a surprise cut to the amount of money that banks must keep in reserve, in an effort to keep money flowing through the financial system and prop up the economy.

The People’s Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) for almost all banks by 0.25 percentage points, effective March 27.

“[We must] make a good combination of macro policies, better serve the real economy, and maintain reasonable and sufficient liquidity in the banking system,” the PBOC said in a statement.

The late Friday move came as a surprise and follows a week of turmoil in global financial markets triggered by the failure of some regional US banks.

As recently as Wednesday, analysts from Goldman Sachs said they were expecting the PBOC to keep interest rates and the RRR “unchanged” through the first half of 2023.

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With just a few days to go until the Federal Reserve’s next interest rate decision, US policymakers are sitting between a rock and a hard place.

The recent banking sector meltdown, triggered partially by Silicon Valley Bank crumbling under the weight of higher interest rates, has led some economists and analysts to call for a moratorium on rate hikes until the industry sorts itself out.

At the same time, inflation remains well above the central bank’s goal of 2%, economic data continues to show labor market strength and consumer spending resilience, and Fed officials have signaled their intent to tighten monetary policy aggressively until price hikes ease.

“The elevated inflation backdrop means that [the Fed] is in a very delicate situation compared with the past 40 years,” wrote Gregory Daco, chief economist at EY, in a note Thursday. In prior years, the Fed was able to respond “unswervingly” to financial risks by loosening policy without worrying about price stability, he said. But conditions today are “very different with inflation still too high.”

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