The collapse of four US banks and the struggles of a fifth has left investors concerned, with each scenario leading to unique circumstances. The Federal Deposit Insurance Corp. attempted to step in to prevent the collapse of Silvergate Capital Corp., the first US bank to fail, due to its exposure to the cryptocurrency industry’s meltdown. However, amid a criminal investigation by the Justice Department’s fraud unit into dealings with FTX and Alameda Research, Silvergate’s attempts to recover were unsuccessful. The bank ultimately announced on March 8 that it would liquidate its operations.

Silicon Valley Bank, part of SVB Financial Group, announced plans to sell $2.25 billion of shares on March 8, shortly after Silvergate’s collapse, causing concern for investors and depositors who were already on edge. Significant losses on its investment portfolio led to a 60% decrease in the company’s shares, leading to its collapse into FDIC receivership the following day. However, hopeful news emerged when the FDIC extended the bidding process after receiving “substantial interest” from potential buyers.

Following a surge in customer withdrawals, Signature Bank became the third-largest bank failure in US history, despite having a smaller exposure to cryptocurrency than Silvergate. Regulators lost faith in the company’s leadership, and the bank was swept into receivership. New York Community Bancorp’s Flagstar Bank purchased Signature Bank’s deposits and some of its loans from the FDIC, and its branches will now operate as Flagstar locations.

Credit Suisse Group AG was acquired by UBS Group AG for CHF 3 billion ($3.2 billion) on March 13 to avoid a broader financial crisis, following multiple scandals and multibillion-dollar losses on Credit Suisse’s dealings with Lex Greensill and failed investment firm Archegos Capital Management. First Republic Bank, which caters to the personal-banking needs of tech’s elite and other wealthy individuals, has fallen victim to the same customer flight that sank three of its US rivals. Despite attempts by 11 US lenders to provide a $30 billion cash infusion, the bank has seen multiple credit-rating downgrades and a potential $89 billion deposit outflow. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon has developed a new plan to aid First Republic that would convert some or all of the 11 banks’ deposit injection into a capital infusion.

Source: Steve Dickson, Bloomberg, March 20, 2023, https://www.washingtonpost.com/business/2023/03/20/bank-collapses-explained/