The collapse of the Silicon Valley Bank (SVB) has brought to the forefront the crisis being faced by American banks. Amid the news of SVB and Signature Bank's collapse, shares of America’s 14th-largest bank began to plunge. The bank’s share lost over 50% of its value, from $81.76 on March 10 to $31.6 on March 16, in days following the SVB bankruptcy.
Wall Street banks jumped to the rescue this time around and offered a $30 billion cash infusion to help First Bank meet its customer withdrawal requests. The treasury department released a statement on March 16 stating, “This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system.” The major banks include JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup.
A spike in customer withdrawal requests was a cause of the SVB and Signature Bank collapse case. SVB had used investor deposits to purchase 5-year treasury bonds and wasn’t sitting on sufficient liquid margins to service the depositor’s requests. The assurance from Wall Street banks reflected positively on First Republic Bank shares, gaining 9.9% to trade at $34.27 on Thursday’s closing.
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