European and American bank stocks welcome "Black Monday", institutions clarify that it is difficult to stop the fierce selling wave

　　Author: Fan Zhijing

　　Affected by the continuous fermentation of the Silicon Valley Bank bankruptcy market last week, a wave of sell-offs swept through the European and American financial sectors on Monday. The S&P 500 Banking Index and the pan-European Stoxx Bank Index both fell 7%.

　　In his speech, U.S. President Biden emphasized the safety of people's deposits, and many European countries took action against domestic Silicon Valley Bank branches and reiterated their confidence in the banking industry.

　Biden's speech is hard to stop fierce selling

　　In a brief speech at the White House on Monday, U.S. President Joe Biden said: "Our banking system is safe, your deposits are safe. And I assure you, we won't stop there. We'll do whatever is needed. Pay taxes People will not bear any losses, and the assistance will come from the fees paid by banks to the deposit insurance fund.” Biden said that he will ask Congress and banking regulators to strengthen regulations on banks to reduce the possibility of such bank failures happening again.

He blamed the previous administration for loosening the rules and announced that the management of the bank involved would be fired after being taken over by the FDIC.

　　Biden's statement and the Fed's targeted launch of the Term Financing Program (BTFP) did not ease market panic.

Investors flocked to regional banks whose net interest margins narrowed in the fourth quarter of last year, similar to Silicon Valley Bank.

　　As of the close, regional banks accounted for the top four decliners in the U.S. stock market, among which San Francisco's First Republic Bank (First Republic Bank) plummeted 61.8%, the worst single-day performance in history.

PacWest Bancorp, Western Alliance Bancorp and Metropolitan Bank all fell more than 40%.

　　Some banks tried to clarify the situation.

East West Bancorp said it had $28 billion in available financing as of March 13.

"In light of recent industry events and market volatility, we reiterate that EastWest Bank has a diverse business model and strong liquidity," company CEO Dominic Ng said in a statement. Diversified by industry and depositor type The degree of globalization is very high, and there is no industry concentration risk.”

　　Charles Schwab unexpectedly took the spotlight as regional banks tumbled, with the financial services giant posting its biggest intraday drop ever.

The latest operating data shows that as of the end of February, total client assets were US$7.38 trillion, down 4% from the same period last year.

Meanwhile the average margin balance in February was down 28% from a year ago.

Market concerns come from the dependence of performance on its bank subsidiaries.

Charles Schwab's net profit for the whole year last year was US$7.18 billion, and its bank's net income was US$3.15 billion.

The bank's accumulated other comprehensive income (AOCI), which includes unrealized losses on available-for-sale securities, totaled a loss of $19.68 billion as of Dec. 31.

　　To assuage investor concerns, Charles Schwab lays out a number of figures, with access to about $100 billion in cash flow, more than $300 billion in financing capacity through the Federal Home Loan Bank and other short-term financing vehicles, and more than 80% of its bank deposits Protected by the Federal Deposit Insurance Corporation.

　　Charles Schwab, founder and co-chairman Charles Schwab, and CEO Walt Bettinger said in a statement that the firm's longstanding reputation as a safe haven in the storm remains intact, thanks to record Excellent business performance, conservative balance sheet, strong liquidity position, and more than 34 million diversified client accounts invested daily through Charles Schwab.

　　Europe stresses confidence in banking sector

　　European stock markets opened lower on Monday, bank stocks became the hardest hit.

The pan-European Stoxx Bank Index tumbled nearly 6%, its worst performance since March 4, 2022.

Among them, the British HSBC shares fell 4.1%, Germany's Deutsche Bank fell 4.9%, BNP Paribas fell 6.8%, and Spain's Santander Bank fell 7.4%.

In addition, Credit Suisse's five-year credit default swap contract (CDS) jumped to a record high of 448 basis points, and Italy's UniCredit Bank was temporarily suspended.

　　Eurogroup Chairman Paschal Donohoe said the failure of Silicon Valley Bank would have very limited impact on the euro zone.

"We have a very strong regulatory and resolution framework in Europe and the European Commission and the ECB have been following developments and will discuss this with euro zone finance ministers at a meeting in Brussels later on Monday local time. "

　　Several European countries have taken action against domestic Silicon Valley Bank branches.

HSBC Holdings announced on the 13th that its UK subsidiary HSBC UK Bank Limited will acquire the UK subsidiary of Silicon Valley Bank for £1.

As part of the transaction, customer deposits will be protected.

The BoE said in a statement that after consultation with the Prudential Regulation Authority (PRA), the Treasury (HMT) and the Financial Conduct Authority (FCA), the parties decided to agree to the deal.

The BoE said the action was taken to ensure the continuity of Silicon Valley Bank's services, minimize disruption to the UK technology sector and support confidence in the financial system.

　　British Prime Minister Rishi Sunak also said later in the day that British banks are well capitalized, have strong liquidity and there is no "systemic risk" in the banking sector.

　　BaFin froze the business of Silicon Valley Bank's German branch because of the risk of not being able to fulfill its commitments to creditors.

BaFin said Silicon Valley Bank's operations in Germany did not pose a threat to financial stability.

　　For the banking sector more broadly, the crisis will lead to more liquidity regulation for banks, with investors favoring larger banks over smaller ones, and retail banks over commercial banks, UBS said in a report. Increased competition for deposits, leading to lower net rates in 2024-25.

　　Spillover risks in the banking sector have also affected investors' expectations for this week's European Central Bank interest rate meeting.

Funds rate futures showed traders priced in a 50 percent chance of a 50 basis point rate hike from the ECB, down from nearly 100 percent previously.

The media quoted sources as saying that the European Central Bank's plan to continue to vigorously raise interest rates is expected to meet stronger opposition.

Dovish policymakers are likely to increase and the economic environment has shifted to call for more caution.