The New York Stock Exchange stands in lower Manhattan after global stocks fell as concerns mount that rising inflation will prompt central banks to tighten monetary policy on May 11, 2021 in New York City. By mid afternoon the tech-heavy Nasdaq Composite had lost 0.6% after falling 2.2% at its session low.
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Signature Bank shares dropped as much as 32% on Friday and were at one point halted amid a sell-off in bank stocks that continued for a second day.
Signature, one of the main banks to the cryptocurrency industry, ended the day down 22%.
The initial move followed a big day for its crypto banking peer Silvergate Capital, which announced earlier this week that it would liquidate its bank. Its losses deepened Thursday after shares of SVB Financial, whose Silicon Valley Bank lends to tech startups, announced a plan to raise more than $2 billion in capital to help offset losses on bond sales.
By late Friday morning, the Federal Deposit Insurance Corp had closed Silicon Valley Bank and taken control of its deposits, making it the largest U.S. bank failure since the global financial crisis.
The troubles at Silicon Valley Bank rippled across financial stocks, as investors worried about the likelihood that other banks with large bond portfolios could face similar issues, if they’re forced to sell those bonds before maturity for fundraising purposes. Treasuries have been falling for the past year as the Federal Reserve has been hiking rates.
First Republic Bank, PacWest Bancorp, Western Alliance Bancorp were among the other names whose trading was at one point halted for volatility.
Signature has said it has minimal exposure to crypto, but Silicon Valley Bank’s need to recapitalize on the heels of the Silvergate event has linked the two events in some people’s minds.
Signature Bank shares Friday
Valkyrie chief investment officer Steve McClurg said the Signature Bank was already hurting on the back of Silvergate’s losses, which now total almost 50% for the week. Its Friday losses are a spillover effect from the Silicon Valley Bank woes, he added.
Ed Moya, an analyst at Oanda, emphasized Signature is caught in the middle of both narratives.
“Signature Bank is getting hit with a one-two punch as concerns grow that any crypto-related bank could be in danger and as financial instability concerns grow for parts of the banking sector,” he said. “There are only a handful of publicly traded banks that have crypto exposure and lots of traders are rushing to bet against them.”
(With Inputs from cnbc)
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