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Many questions must be asked of the US regional banking system.
Can it stabilize following the collapse of Silicon Valley Bank (SVB), Signature Bank and First Republic – not to mention the liquidation of Silvergate? Has the deposit run, which saw $42 billion pulled from SVB in a few hours and $100 billion drain away from First Republic in the first quarter, now stopped or just slowed to a walk?
And to what extent will a new, higher-cost phase in bank funding – with regional and large banks responding to sharply higher deposit betas by boosting deposit rates – weaken bank profitability?
This new environment will expose a subset of regional banks to conditions that may make their business models unviable.
Asset allocation has been so distorted during the years of low and zero interest-rate policy that...
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