The actions of the banking sector collapsed this Monday in most of the world markets as a result of the bankruptcy of the Silicon Valley Bank in the United States, due to the fear that other entities face similar problems and force the authorities to come out to the rescue of deposits of savers.
This triggered the criticism of investors against the Federal Reserve (FED) for lack of control and supervision to avoid a financial debacle.
Given this and after the authorities launched a package of measures to ensure the return of deposits to savers, the FED announced this Monday in Washington that Vice President of Supervision, Michael Barr, will be in charge of reviewing supervision and regulation of Silicon Valley Bank, in light of its bankruptcy and that the results of the survey will be published on May 1.
In a statement, Fed Chairman Jerome Powell stated that “developments surrounding Silicon Valley Bank (SVB) demand a thorough, transparent and prompt review by the Federal Reserve.”
“We need to be humble and do a careful and thorough review of how we oversee and regulate this company, and what we need to learn from this experience,” said Vice President Barr, who was appointed to lead the audit.
Concerns about what lies ahead led Wall Street to close with slight losses, although other stocks such as technology managed to surf the crisis and closed in positive territory as they believe that the Fed will not adopt a very aggressive stance in next week’s meeting. in regards to interest rates.
The Dow Jones industrial average fell 0.3%, the broad S&P 500 index fell 0.2% and the Nasdaq technology indicator rose 0.5%, according to data provided by the New York Stock Exchange (NYSE).
The biggest falls again came from banks and other financial companies. Investors worry that a sharp rise in interest rates aimed at reining in inflation is nearing a tipping point and may be cracking the banking system.
Critics of the supervision channels focus not only on the FED but also on the external auditors of the SVB and other financial entities in trouble, putting at stake the prestige of the so-called “Big Four”, the four large accounting auditing firms that They give the go-ahead to the balance sheets of financial institutions.
The US government announced a plan late Sunday aimed at bolstering confidence in the banking industry following the collapses of Silicon Valley Bank and Signature Bank.
Now, the regional banks are in the eye of the hurricane and during the day the losses accumulated at a frantic rhythm affecting the shares of the First Republic banks, which sank 62%; West Alliance Bancorp, down 47%; and PacWest Bancorp, with a red of 21%.
The message investors are sending to the Fed and the US Treasury Department is that emergency measures, including guaranteeing all depositors’ money and providing easier lending terms to cash-strapped banks, may not be enough to protect the banks.
Such is the magnitude of the crisis in the financial system that it managed to overshadow the announcement of the monumental purchase by the pharmaceutical company Pfizer of the medical company Seagen, a leader in the production of cancer therapies for which it paid 43,000 million dollars, in One of the biggest acquisitions in recent years.
In the short term, investors’ attention is focused on the publication of the inflation indices that will be released tomorrow, with which the FED will be able to define the magnitude of the adjustment of its reference rate.
Until last Friday, the market projected that the Fed would adjust the rate by 50 basis points next week, but given the depth of the crisis unleashed in the banking sector, many bet that the percentage will be more cautious, around 25 points.
The investment bank Goldman Sachs published today in a note that the Fed could avoid even adjusting the rate at its next meeting on Wednesday, March 22, to prevent more financial entities from getting into trouble.
Frantic demand for Treasury bonds caused yields on some notes to fall by more than half a percentage point as traders and investors believe the Fed is unlikely to raise interest rates and recession is now all but inevitable.
The US system of federal home loan banks, a key source of cash for regional lenders, is increasing the amount of cash it has available to deploy as the SVB bankruptcy raises expectations that more banks will need help, it reported. Bloomberg Agency.
The financial authorities yesterday presented a rescue plan to protect the funds of SVB depositors, with placements of up to $250,000. The Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation jointly announced measures that include a bank financing program, managed by the FED.
This program allows banks to place Treasury bonds, which have fallen in value significantly over the past year, with the Fed and recover their face value in the form of a one-year loan.
