Credit Suisse chaos, Silicon Valley Bank collapse: What you need to know

(Reuters) – Global stocks fell sharply on Wednesday, with embattled Credit Suisse tumbling to a new low, on renewed investor concerns about stresses within the sector triggered by Silicon Valley Bank’s sudden collapse.

DEVELOPMENTS

* SVB Financial Group, the company whose former subsidiary Silicon Valley Bank was taken over by U.S. banking regulators last week, is exploring seeking bankruptcy protection as one option for selling assets that include its investment bank and venture capital business, people familiar with the matter said.

* Regulators at the U.S. Federal Deposit Insurance Corp (FDIC) have tapped investment bank Piper Sandler Companies to relaunch the auction of Silicon Valley Bank, people familiar with the matter said on Wednesday.

* The European Central Bank has contacted banks on its watch to quiz them on their exposure to struggling Swiss lender Credit Suisse CSGN.S, two supervisory sources told Reuters. One of the sources said, however, that they saw Credit Suisse’s problems as specific to that bank, rather than being systemic.

* The U.S. Treasury is monitoring the situation around Credit Suisse and is in touch with global counterparts about it, a Treasury spokesperson said on Wednesday.

* BlackRock Inc Chief Executive Laurence Fink warned the U.S. regional banking sector remains at risk after the collapse of Silicon Valley and that inflation will persist and rates would continue to rise.

* Credit Suisse chairman Axel Lehmann said state assistance “isn’t a topic” for the bank as it seeks to recover from a string of scandals that have undermined the confidence of investors and clients, Bloomberg reported on Wednesday.

* S&P has not placed other U.S. banks on CreditWatch negative since First Republic Bank as it has not seen widespread deposit outflows, the ratings agency said hours after Moody’s cut its outlook on the U.S. banking system to negative.

* The U.S. Federal Reserve will not raise interest rates next week with regional banks playing key role in U.S. credit extension, Apollo Global Management’s chief economist said.

* SVB Financial Group said on Tuesday Goldman Sachs Group Inc was the acquirer of a bond portfolio on which it booked a $1.8 billion loss, a transaction that set in motion the failure of SVB.

* Ratings agency Moody’s cut its outlook on the U.S. banking system to negative from stable on Tuesday “to reflect the rapid deterioration in the operating environment.”

* The Federal Reserve is considering tougher rules and oversight for midsize banks similar in size to SVB, a source familiar with the matter said on Tuesday.

* Apollo Global Management Inc, Blackstone Inc and KKR & Co Inc have expressed interest in a book of loans held by SVB, Bloomberg News reported on Tuesday, citing people familiar with the matter.

MARKETS

* Shares in European banks got pummelled as Credit Suisse plunged over 30% after the lender’s biggest shareholder said it could not raise its 10% stake citing regulatory issues.

* MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6%, having slid 1.7% on Tuesday. Japan’s Nikkei index was flat while an index of Japanese banks, which has slid 8% this week, jumped over 3%.

* In the United States, regional banks also fell, with First Republic Bank FRC.N down 23%, Western Alliance Bancorp WAL.N up 5% and PacWest Bancorp PACW.O off around 20%. Big U.S. banks such as JPMorgan Chase & Co JPM.N, Citigroup C.N and Bank of America Corp BAC.N slid by between 2% and 6%.

* Yields on U.S. government bonds fell sharply on investors’ flight towards safe-haven assets. U.S. two-year yields, which reflect interest rate expectations dropped to 3.72%, the lowest since September and were last down 41 basis points at 3.817%. The yield on 10-year Treasury notes fell 21.1 bps to 3.426%.

* Euro zone bond yields also tumbled, with Germany’s two year yield dropping 30 basis points (bps) to 2.61%, heading back towards the lows it touched a day earlier.

QUOTE

* “It’s too early to know how widespread the damage is,” BlackRock CEO Laurence Fink wrote in an annual letter to investors. “The regulatory response has so far been swift, and decisive actions have helped stave off contagion risks. But markets remain on edge.”

* Asked about the impact of Credit Suisse’s problems on the U.S. banking system, U.S. Senator Bernie Sanders told Reuters: “Everybody is concerned.”

* “Key central banks have all the tools now necessary to stem contagion,” said Salman Ahmed, Global Head Of Marco And Strategic Asset Allocation, Fidelity International, London. “There was a lot of progress made after the 2008-2009 crisis. So there’s a variety of tools — we’ve seen that in the eurozone, we’ve seen that with the Fed, the Bank of Japan, obviously, can deploy a lot more liquidity there.”