The First Republic – another American bank in crisis: how did it get there? – News

After the bank runs, the next US bank is in trouble. Root cause analysis.

Another bank in crisis: First Republic Regional Bank in the United States is currently facing a bank run. The entire stock collapsed. Investors doubt the bank’s viability. “In the first quarter, customers withdrew about half of their deposits,” says Jens Corti, SRF’s exchange correspondent. “It’s dramatic.”

The reason for the difficulties: The US Federal Reserve raised interest rates sharply last year. This has thrown many banks into trouble. “Interest rates have been raised as hard as they were in the 1980s,” Korte says. Despite the turmoil, the European Central Bank continued to raise interest rates in mid-March. Another interest rate decision is scheduled for May 4.

Silicon Valley Bank Collapse: In March, the collapse of the Silicon Valley Bank and several other regional banks in the United States sent shock waves through the financial markets. Shortly thereafter, the large bank UBS had to bail out Credit Suisse with an emergency takeover.

The case of small and medium banks in the USA: The Economist suspects more small and medium bank mergers are taking place in the US, where many banks are in crisis. When it comes to mergers, it’s about making banks appear safer to customers, Corti says. “This may really help some banks, but the question is whether they really want to work together,” says the expert. In his opinion, it is unlikely that many banks will agree to the merger because they do not know exactly how the partner bank operates and how high the risks are.

Stricter rules for financial institutions in the US: Expert Korte sees this in action. He says, “Whenever there is a banking crisis, there are calls for tighter regulations. However, the rules cannot be strict enough to prevent all financial crises.” Crises arise where you least expect them. Of course the tightening will be discussed and certainly some items will be changed. But he does not expect that this will be able to prevent a new crisis.