Silicon Valley Bank collapse: What you need to know

(Reuters) – European bank 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

* 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 20% 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%.

* U.S. equity futures fell sharply after European banking stocks tumbled.

* Regional U.S. banks fell in the premarket. First Republic Bank was flat, with peers Western Alliance Bancorp and PacWest Bancorp down 2% and 12%, respectively.

* Big U.S. banks including JP Morgan Chase, Citigroup and Bank of America were all hit, by between 2% and 4%.

* Yields on U.S. government bonds fell sharply on investors’ flight towards safe-haven assets. The yield on the two-year U.S. Treasury note dropped to a session low of 3.968% and was last down 19 basis points to 4.039%. The 10-year yield was down 9 basis points at 3.541%.

* 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.”

(Compiled by Anna Driver, Lincoln Feast and Tomasz Janowski)