Shares of American banks were under pressure ahead of the opening of the New York session. First Republic Bank shares fell by 70%, even after federal regulatory authorities took action to strengthen the banking system following the collapse of Silicon Valley Bank and Signature Bank, according to FT.
All major banks have fallen, but the shares of regional creditors have been the most affected. Western Alliance Bancorporation shares fell by over 53% to $22.99, while PacWest Bancorp shares fell by nearly 38% to $7.75.
Zions Bancorporation and KeyCorp had more modest declines, with shares down by 17% and 8%, respectively.
The SPDR S&P Regional Banking exchange-traded fund fell by nearly 7%.
The shares of the four largest US banks, JPMorgan, Citigroup, Bank of America, and Wells Fargo, fell between 1.1% and 3.8% in pre-market trading.
The current situation of falling shares of American banks can be reminiscent of the 2008 financial crisis when the stock prices of major US banks also declined significantly, leading to a widespread recession. While it is too early to say whether this situation will escalate into a crisis, the fact that regional creditors are the most affected may suggest a possible contagion effect in the financial system.
If the situation persists, it may lead to a liquidity crisis, where banks are unable to meet their obligations due to a lack of available funds. This could then lead to a broader economic downturn, impacting businesses and individuals who rely on banks for financing.
However, there are some differences from the 2008 financial crisis. First, the current situation is not caused by a subprime mortgage crisis, but rather by the impact of the COVID-19 pandemic on the economy. Second, regulatory authorities have taken actions to strengthen the banking system since the 2008 crisis, which may help mitigate the impact of any potential crisis.
Overall, the current situation of falling bank shares is concerning, and it is important to monitor the situation closely to see how it develops.
