US banks are on a ‘bumpy’ path as troubles deepen at First Republic, following the collapse of Silicon Valley Bank and Signature

One of the two collapsed lenders remained for sale while the fate of a third bank looked increasingly bleak

Billionaire Warren Buffett was in touch with the Biden administration about potentially providing aid

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A queue outside the headquarters of the Silicon Valley Bank (SVB) in Santa Clara, California on March 13, 2023.Photo: Xinhua.

Published: 12:25pm, 20 Mar 2023Updated: 12:47pm, 20 Mar 2023

Just weeks ago, they were bit players in the giant US banking system. Now, a handful of regional lenders are at the heart of a crisis that is shaken the country and engaged the likes of Warren Buffett and Jamie Dimon.

At the last tally in the rapidly evolving turmoil, one of the two collapsed lenders remained for sale while the fate of a third bank looked increasingly bleak. Billionaire investor Buffett was in touch with the Biden administration about potentially providing aid, while smaller banks and lawmakers demanded that the government offer more protection for customer deposits.

The continued upheaval – despite regulators’ efforts to contain it – came amid another wrenching moment in banking: UBS Group agreed to buy Credit Suisse Group after a crisis of confidence at the stricken lender. While that deal ends a week of intense speculation over the Swiss bank’s fate, the prospects for America’s regional banks remain uncertain.

“This is going to be pretty bumpy going forward,” Mohamed El-Erian, chief economic adviser at Allianz and a Bloomberg Opinion columnist, said in an interview with Bloomberg Television. “People are doing something that probably is not rational but is totally understandable – they’re moving deposits. That dynamic isn’t going to stop over night, neither are the losses that are being incurred.”

Depositors have been fleeing regional lenders following the collapse of SVB Financial Group’s Silicon Valley Bank, after it failed to raise capital amid huge losses on its debt investments. In one day alone, depositors attempted to pull US$42 billion. The bank collapsed into receivership the next day and the Federal Deposit Insurance Corp. (FDIC) sought a sale.