The market still appears to be hunting for weakness among some smaller U.S. banks and even across Europe after U.S. authorities stepped in to guarantee deposits at Silicon Valley Bank. This makes little sense: There should be no snowballing of runs on banks. But profit expectations could be trimmed at many firms, which could justify some — but far from all — of the price declines.
The Federal Reserve brought out its bazooka Sunday, guaranteeing funds for any bank whose depositors might have been clicking “withdraw” over the weekend. The central bank saw clear potential for a systemic crisis in the closures of SVB and Signature Bank and acted to kill it before it got started.
In Europe, the much smaller local office of SVB in the UK was easily absorbed into HSBC Holdings Plc in a private solution negotiated by regulators swiftly over the weekend. The chances of contagion were far smaller in Europe anyway, in part because rules designed to ensure that banks can cope with a sudden wave of deposit withdrawals apply to many more institutions than in the U.S.
