Four Banks Collapsed In 11 Days And A Fifth Teetered On The Brink

Investors are in disbelief at how quickly four banks collapsed—and one is still struggling. The failures occurred over the course of just 11 days, yet each one was caused by a different set of circumstances.

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Here is how the companies' unrest unfolded and how authorities reacted in light of worries that the problem could yet get worse:

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Silvergate

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The first failed US bank was Silvergate Capital Inc., which was destroyed by its exposure to the fall of the cryptocurrency market. The Federal Deposit Insurance Corp. attempted to intervene with permission from the Federal Reserve by talking with management about methods to avert a shutdown.

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However, despite regulatory scrutiny and a criminal probe by the Justice Department's fraud unit into interactions with Sam Bankman-defunct Fried's crypto titans FTX and Alameda Research, the La Jolla, California-based business was unable to recover.

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Even though there was no accusation of wrongdoing, Silvergate's problems grew as the bank sold off assets at a loss to repay withdrawals from its alarmed clients. On March 8, it made preparations to wind down operations and liquidate the bank.

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Silicon Valley Bank

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Investors and depositors in Silicon Valley Bank, a subsidiary of SVB Financial Group, were already on edge when the company announced a plan to sell $2.25 billion worth of shares on March 8 in addition to suffering sizable losses on its investment portfolio. Silvergate's obituary had already been largely written.

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Following the news, the company's shares fell by 60% the following day, and it was placed under FDIC receivership the following day. After they were unable to find a viable buyer, US regulators started to consider breaking up the bank. The FDIC prolonged the bidding process on Monday, however, after observing "significant interest" from numerous prospective buyers.

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According to persons familiar with the situation, Trade Algo reported that First Citizens BancShares Inc., one of the largest buyers of bankrupt US lenders, is still working to secure a deal for the entirety of Silicon Valley Bank.

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Signature Bank

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Following an increase in client withdrawals that reached a total of nearly 20% of the firm's deposits on March 12, Signature Bank was ranked as the third-largest bank collapse in American history.

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Clients were wary of preserving their accounts at Signature Bank because of Silvergate's collapse four days earlier, despite the bank's significantly lower exposure to cryptocurrencies. Federal regulators swept the bank into administration after declaring a lack of confidence in the company's management. A regulation known as the "systemic risk exemption" allowed both insured and uninsured customers access to all of their deposits.

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Late on Sunday, Flagstar Bank, a subsidiary of New York Community Bancorp, acquired deposits and some loans from Signature Bank. The buyer agreed to buy $38 billion of assets from the FDIC, including $25 billion in cash and roughly $13 billion in loans. A total of $36 billion in liabilities, including $34 billion in deposits, were also assumed. The branches of Signature will now function as Flagstar locations.

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Credit Suisse

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As Swiss officials mediated an agreement with UBS Group AG for a 3 billion franc ($3.2 billion) acquisition intended to prevent a wider financial crisis, Credit Suisse Group AG's stock dropped on Sunday. Only full or partial nationalization was being considered as a substitute.

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Following Chief Executive Officer Ulrich Koerner's attempt to preserve the bank with a significant outreach to customers who had withdrew an unusual amount of money from the bank last year, the 166-year-old Swiss institution was shut down. Ultimately, the effort was insufficient to offset numerous controversies and enormous losses related to Credit Suisse's connections with disgraced banker Lex Greensill and failing investment firm Archegos Capital Management.

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The bank's annual report was questioned by the US Securities and Exchange Commission on March 9, which made it impossible for it to be published on time. The failure of American regional lenders caused widespread panic, and the chairman of Saudi National Bank, the bank's largest shareholder, decided against making any additional investments in the business.

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First Republic

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First Republic Bank was affected by the same client flight that ultimately led to the demise of three of its American competitors; one estimate places the possible outflow of deposits at $89 billion.

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This Monday, First Republic Bank received a $30 billion financial injection from eleven American institutions. But, the San Francisco-based business, which serves the personal banking requirements of wealthy individuals and the tech elite, has plunged to an all-time low as a result of numerous credit rating downgrades.

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JPMorgan Chase and Co. According to people familiar with the matter, Chief Executive Officer Jamie Dimon has come up with a new strategy to help First Republic that would turn some or all of the $30 billion deposit injection from the 11 banks into a capital infusion.