A sign of a branch of the Silicon Valley Bank is pictured at an office building where the bank is located in Frankfurt, Germany, Monday, March 13, 2023. (AP Photo/Michael Probst) A branch of Signature Bank is photographed, late Sunday, March 12, 2023, in New York. Regulators announced that the New York-based bank had failed and was being seized. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history. Signature's failure comes just days after the failure of Silicon Valley Bank. (AP Photo/Bobby Caina Calvan) A sign of a branch of the Silicon Valley Bank is pictured at an office building where the bank is located in Frankfurt, Germany, Monday, March 13, 2023. (AP Photo/Michael Probst) A pedestrian passes by the Hong Kong Stock Exchange electronic screen in Hong Kong on Monday, March 13, 2023. Asian shares mostly fell Monday, shaken by a Wall Street tumble that set off worries the biggest U.S. bank failure in nearly 15 years might have ripple effects around the world. (AP Photo/Louise Delmotte) A branch of Signature Bank is photographed, late Sunday, March 12, 2023, in New York. Regulators announced that the New York-based bank had failed and was being seized. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history. Signature's failure comes just days after the failure of Silicon Valley Bank. (AP Photo/Bobby Caina Calvan) President Joe Biden speaks about the banking system in the Roosevelt Room of the White House, Monday, March 13, 2023 in Washington. (AP Photo/Andrew Harnik) A person leaves one of the Signature Bank branches in New York, Monday, March. 13, 2023. President Joe Biden is telling Americans that the nation’s financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Yuki Iwamura) A person walks past the Signature Bank headquarters in New York, Monday, March. 13, 2023. President Joe Biden is telling Americans that the nation’s financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Yuki Iwamura) A person leaves one of the Signature Bank branches in New York, Monday, March. 13, 2023. President Joe Biden is telling Americans that the nation’s financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Yuki Iwamura) A person enters the Signature Bank headquarters in New York, Monday, March 13, 2023. President Joe Biden is telling Americans that the nation’s financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Yuki Iwamura) A view of the Signature Bank headquarters in New York, Monday, March. 13, 2023. President Joe Biden is telling Americans that the nation’s financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Yuki Iwamura) A woman leaves a branch of Signature Bank in New York, Monday, March 13, 2023. President Joe Biden is telling Americans that the nation's financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Seth Wenig) A sign is displayed at a branch of Signature Bank in New York, Monday, March 13, 2023. President Joe Biden is telling Americans that the nation's financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Seth Wenig) A woman works at a branch of Signature Bank in New York, Monday, March 13, 2023. President Joe Biden is telling Americans that the nation's financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Seth Wenig) A sign is displayed at a branch of Signature Bank in New York, Monday, March 13, 2023. President Joe Biden is telling Americans that the nation's financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Seth Wenig) A sign is displayed at a branch of Signature Bank in New York, Monday, March 13, 2023. President Joe Biden is telling Americans that the nation's financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Seth Wenig) Jessika Harville, center, and Michele Barry, right, wait for the Silicon Valley Bank to open in Palo Alto, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Barry and Harville were waiting in line to withdraw funds. (AP Photo/ Benjamin Fanjoy) Customers wait in line to withdraw funds from Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the bank's collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/ Benjamin Fanjoy) Igor Fayermark, right, from the Federal Deposit Insurance Corporation (FDIC), exits Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the bank's collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/Benjamin Fanjoy) Michele Barry waits outside a Silicon Valley Bank to withdraw funds in Palo Alto, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the bank collapse. Several individuals waited in line before the bank opened to withdraw funds. (AP Photo/ Benjamin Fanjoy) Jessika Harville, left, and Michele Barry wait for the Silicon Valley Bank to open located in Palo Alto, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Barry and Harville were waiting in line to withdraw funds. (AP Photo/ Benjamin Fanjoy) A notice taped to a Silicon Valley Bank ATM reads "California Financial Regulator Takes Possession of Silicon Valley Bank" in Palo Alto, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Several individuals waited in line before the bank opened to withdraw funds. (AP Photo/ Benjamin Fanjoy) Bob, who did not want to provide a last name speaks with press after exiting Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the bank's collapse. Bob said that he has been a customer of SVB for 25 years and came to the bank to withdraw his money. (AP Photo/Benjamin Fanjoy) Igor Fayermark, right, from the Federal Deposit Insurance Corporation (FDIC), exits Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the bank's collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/Benjamin Fanjoy) Igor Fayermark, left, from the Federal Deposit Insurance Corporation (FDIC), speaks with customers at Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/Benjamin Fanjoy) Security guards let individuals enter the Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/ Benjamin Fanjoy) Igor Fayermark, right, from the FDIC enters Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/ Benjamin Fanjoy) FDIC member Dedra Dorn distributes "frequently asked questions" hand outs to individuals at the Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/ Benjamin Fanjoy) A woman who was part of a line entering the Silicon Valley Bank's headquarters pauses for a selfie in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/ Benjamin Fanjoy) A person reads a notice posted on the front doors of a Silicon Valley Bank branch that reads "FDIC Acts to Protect All Depositors of the former Silicon Valley Bank, "Santa Clara, California," in Pasadena, Calif., on Monday, March 13, 2023. The U.S. government announced a plan late Sunday meant to shore up the banking industry following the collapses of Silicon Valley Bank and Signature Bank since Friday. (AP Photo/Damian Dovarganes) Igor Fayermark (L) from the FDIC enters Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/ Benjamin Fanjoy) FDIC member Dedra Dorn (Center Left) speaks with individuals in line outside Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Dozens of individuals waited in line outside the bank to withdraw funds. (AP Photo/ Benjamin Fanjoy) Customers do business at a branch of Signature Bank in New York, Monday, March 13, 2023. President Joe Biden is telling Americans that the nation's financial systems are sound. This comes after the swift and stunning collapse of two banks that prompted fears of a broader upheaval. (AP Photo/Seth Wenig)
NEW YORK (AP) — Depositors withdrew savings and investors broadly sold off bank shares Monday as the federal government raced to reassure Americans that the banking system was secure after two bank failures fed fears that more financial institutions could fall.
President Joe Biden insisted that the system was safe after the second- and third-largest bank failures in the nation's history happened in the span of 48 hours. In response to the crisis, regulators guaranteed all deposits at the two banks and created a program that effectively threw a lifeline to other banks to shield them from a run on deposits.
“Your deposits will be there when you need them,” Biden told the public, seeking to project calm. He also said the banking executives responsible for the failures would be held accountable.
In other developments, the Federal Reserve announced that it would reassess its supervision of Silicon Valley Bank.
“We need to have humility and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience,” said Michael Barr, the Fed’s vice chair for supervision, who will lead the effort.
Regulators closed the bank Friday after depositors rushed to withdraw their funds all at once. The only larger failure in U.S. banking history was the 2008 collapse of Washington Mutual. New York-based Signature Bank was seized by regulators late Sunday in third-largest failure in the U.S.
In both cases, the government agreed to cover deposits, even those that exceeded the federally insured limit of $250,000.
Despite the message from the White House, investors broadly dumped shares in bank stocks. Shares of First Republic Bank closed down more than 60% even after the bank said it was taking emergency funding from the Federal Reserve and additional money from JPMorgan Chase.
Shares in KeyCorp and Comerica plunged by nearly a third. The stock of well-known franchises such as Charles Schwab, Fifth Third Bank, Truist and Huntington Bancshares all dropped by double digits.
The selloff happened in part because the country woke up to a new banking system and investors had to find the winners and losers, banking experts said.
There was no guarantee that the anxiety would not spread. Customers at other banks with deposits over the $250,000 limit remained at risk of losing access to their money for a time.
Just because the government covered for Silicon Valley Bank and Signature Bank "doesn’t mean they are going to cover for these smaller banks,” said Chris Caulfield, a senior partner at West Monroe.
In Asia, direct exposure to the risks from the U.S. failures seemed slim, at least so far. Hirokazu Matsuno, the Japanese government spokesman, told reporters a major ripple effect to the Japanese financial system was unlikely. But fears sent regional benchmarks lower in morning trading.
Japan’s benchmark Nikkei 225 dropped 1.7%, extending losses from the day before. Australia’s S&P/ASX 200 dipped 2.1%, and South Korea’s Kospi fell 0.9%. The Shanghai Composite index lost 0.7%, while Hong Kong’s Hang Seng was down 1%.
Wesley Zheng, co-founder and CEO of Posh Robotics, which is working to develop sustainable batteries, said he will move $4 million from Silicon Valley Bank to JPMorgan Chase.
“No more small banks. We have so many other things we’re working on, we don’t want to be worried about figuring out the risk management of the banks we’re working with," he said.
Further, the government's actions suggested it would stand behind all deposits if doing so prevents damage to the broader economy.
“Everything is now covered. That’s a fact. No matter how specialized or isolated your bank is, if there’s a risk of contagion, regulators have made it clear that they are going to intervene,” said Norbert Michel, a banking policy expert at the libertarian-leaning Cato Institute.
Amid the selloff of midsize banks, investors kept relatively calm over the health of the nation’s biggest banking bulwarks, such as Citigroup, Bank of America and Wells Fargo. Investors apparently concluded that the only place to be safe in banking was with the nation’s most strictly regulated institutions.
Notably, shares in JPMorgan Chase — the nation's biggest bank with more than $3 trillion in assets — fell a modest 1.8% on Monday.
Regional banks were seen as the riskiest, since they do not have the scale to compete against larger competitors. Large account balances — once seen as a positive sign that a bank's clients are well off — were a liability since they could be withdrawn at the first sign of trouble.
“I wouldn’t want to be running a regional bank right now where my services are no different from my competition,” Caulfield said.
International regulators also had to step in to ease fears. The Bank of England and U.K. Treasury said they facilitated the sale of a Silicon Valley Bank subsidiary in London to HSBC, Europe’s biggest bank. The deal protected 6.7 billion pounds ($8.1 billion) of deposits.
Under the plan announced by U.S. regulators, depositors at Silicon Valley Bank and Signature Bank were able to access their money. A new Fed program will allow banks to post certain high-quality securities as collateral and borrow from a government emergency fund.
The Treasury has set aside $25 billion to offset any losses. However, Fed officials said they do not expect to have to use that money, given that the securities posted as collateral have a very low risk of default.
New York bank regulators took possession of Signature Bank on Sunday, ousting its leaders and handing day-to-day control over to the Federal Deposit Insurance Corp.
New York Gov. Kathy Hochul said the decision by the state Department of Financial Services was aimed at holding off a bigger crisis involving more banks.
“Our view was to make sure that the entire banking community here in New York was stable, that we can project calm,” Hochul said Monday at a news conference.
She said a high volume of withdrawals that began last week continued with online transactions through the weekend. The bank was open Monday under the name of Signature Bridge Bank.
Signature, which was founded more than two decades ago, has about 40 offices across the country and says it focuses on banking for privately owned businesses, their owners and senior managers.
Though Sunday’s steps marked the most extensive government intervention in the banking system since the 2008 financial crisis, the actions were relatively limited compared with 15 years ago.
The two failed banks themselves have not been rescued, and taxpayer money has not been provided to them.
Michele Barry, a teacher who was at Silicon Valley Bank on Monday, said members of the FDIC and bank employees were available to answer questions.
Barry, who also runs an after-school program for children, wanted to make sure that her four employees would be paid. She was told that all checks from Friday would be honored, along with her automatic payments.
Barry left enough in her account to cover the payments, but she transferred the bulk of her money over to another bank. She said Biden’s reassurance was helpful.
“I’m from South Africa. Chances are if this happened in South Africa, nobody would insure your money,” she said.
___ Rugaber and Megerian reported from Washington. Sweet and Bussewitz reported from New York. Associated Press writers Hope Yen in Washington; Michelle Chapman in New York; Jennifer McDermott in Providence, Rhode Island; Geoff Mulvihill in Cherry Hill, New Jersey; and Danica Kirka in London contributed to this report.
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