Shares in U.S. banks broadly declined on Friday with the failure of SVB Financial Group hitting the industry as a whole. The California banking regulator closed Silicon Valley Bank, with the company’s stock being halted on Friday.
The closure of SVB Financial Group has become the biggest U.S. banking failure since the 2008 financial crisis. As the Federal Deposit Insurance Corp (FDIC) disposes of SVB’s assets, news of the bank’s failure has affected the rest of the American banking sector, with the S&P 500 regional banks index declining by 6% on Friday to record a weekly loss of 20%. Now, other U.S. and European banks are expressing concern over hidden risks within the banking sector.
As inflation persists, the Federal Reserve has resorted to continue raising interest rates; a move that has done much to expose vulnerabilities within banking.
“There are obvious cracks in the system, and the worry is if the Fed raises rates in two weeks, will that break something in the banking system,” Jake Dollarhide, chief executive at Longbow Asset Management in Tulsa, Oklahoma observed. “That’s why the banks are selling off and the market is nervous.”
Bank of America shares dipped by 1% on Friday, while Signature Bank plummeted by 25% and San Francisco-based First Republic Bank dropped almost 22%. JPMorgan & Chase, in contrast, gained 1.6%.