The Federal Reserve Open Markets Committee will begin its quarterly policy meeting Tuesday, with the Fed’s decision coming out on Wednesday at 2 p.m., followed by Powell’s press conference. Given the banking industry upheaval, at midweek investors were 50-50 on the Fed pausing or raising rates at this meeting. 

At the American Bankers Association Washington Summit, which begins today, Treasury Secretary Janet Yellen will give remarks on the economy and the health of the banking system at the opening session on Tuesday, and Acting Comptroller of the Currency Michael Hsu will discuss his agency’s priorities and policy issues facing the banking industry on Wednesday. 

Citigroup Inc. CEO Jane Fraser will speak at the Economic Club of Washington, D.C., on Wednesday. 

Sheila Bair, former chair of the Federal Deposit Insurance Corp., will join The Washington Post on Tuesday to discuss the path forward for the global banking system. 

Meetings and hearings worth noting:

The Securities and Exchange Commission will discuss reporting requirements at an open meeting on Wednesday.

The Senate Subcommittee on Financial Services and General Government will hear from Yellen on the Treasury Department’s budget justification in a Wednesday hearing. 

United States Trade Representative Katherine Tai discusses “The President’s 2023 Trade Policy Agenda” in a Senate Finance Committee hearing Thursday. 

Office of Management and Budget Director Shalanda Young will testify before the House Committee on the Budget on Thursday to discuss the president’s fiscal 2024 budget. She faced heat from the Senate over Social Security last week. 

M&A

• US regulators open to sharing losses to smooth sale of SVB and Signature (Financial Times)
• UBS in talks to acquire Credit Suisse (Financial Times)
• Switzerland prepares emergency measures to deliver UBS takeover of Credit Suisse (Financial Times)
• BlackRock Not Working on Rival Bid for Credit Suisse (Bloomberg)

First Republic eyed as next failure risk

• On Friday, it was revealed that the nation’s largest banks would inject $30 billion in deposits into First Republic Bank in a move to stabilize the institution and shore up faltering confidence in the banking industry more broadly, a move that came together after discussions between bank executives, Washington regulators and Treasury Secretary Janet Yellen, people familiar with the matter told The Wall Street Journal.
• That display of support did not reassure investors. See the Stat of the Week below to see how First Republic Bank’s shares moved in response to the rescue plan. 
• On Wednesday, First Republic had said it was exploring strategic options, which could include the sale of the bank, people with knowledge of the matter told Bloomberg, after the bank was downgraded to junk status by Fitch and S&P Global Ratings this week.

Banking failure shockwaves cross the Atlantic

• Credit Suisse’s battered shares recovered from a midweek dive after the Swiss National Bank agreed to provide up to 50 billion Swiss francs ($54 billion) in liquidity to the bank, giving Credit Suisse the funds to buy back about 3 billion Swiss francs’ worth of its debt, according to the Financial Times. 
• The Treasury Department was reportedly working with the Fed and European regulators to review the exposure of U.S. banks to Credit Suisse after the bank’s shares fell by a record amount in a single day, people familiar with the matter told Bloomberg.

Too medium to fail?

• The Wall Street Journal reported that the Federal Reserve is considering stricter capital requirements and more stringent “stress tests” for medium-sized banks with between $100 billion to $250 billion in assets, according to a person familiar with the latest thinking among U.S. regulators. 
• Bloomberg also reported that as part of the Fed’s review of SVB oversight by central banks, regulators are looking into the failed bank’s lack of a risk officer.

Investigations

• The Justice Department and the Securities and Exchange Commission were said to be in the preliminary stages of investigating the collapse of SVB and are looking into stock sales by SVB Financial Group’s officers in the days prior to the bank’s failure, people familiar with the matter told The Wall Street Journal. 
• Bloomberg also reported that before Signature Bank was put into receivership, the Justice Dept. was already looking into Signature Bank’s involvement with crypto clients and whether the bank took sufficient steps to detect illicit activity such as money laundering.

Consumer trust in banks

• Bloomberg reported that as news of the failures of SVB and Signature Bank spread, customers were taking their deposits out of regional banks and moving to the “too big to fail” banks — including Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co. — which were seeing higher-than-usual volumes in deposits, though small banks were seeing a bump too. 
• Morning Consult found that despite the shuffles, 7 in 10 U.S. adults still trust banks.  
  

Washington’s response

• Yellen told Senate lawmakers Thursday that there is no guarantee that all future uninsured bank deposits will be made whole by the U.S. government. As lawmakers pressed Yellen on whether the recent measures by the Biden administration to cover all uninsured deposits at SVB and Signature Bank could become a new norm, Yellen established that only uninsured deposits at banks that pose systemic risk to the financial system would be covered in the future. 
• The New York Times reported that as Biden administration officials were putting together a bank depositor bailout late last week, they wanted to include language that placed blame for the recent banking collapses on shortcomings in banking regulations, according to several people involved in or close to the discussions, but Federal Reserve Chair Jerome Powell pushed to have the language removed. In the joint statement released Sunday by the Fed, the Treasury and the FDIC, Powell wanted instead to focus on the actions designed to strengthen the financial system, such as guaranteeing SVB customers’ deposits, according to a person familiar with that matter.

Banks beef up their funds 

• Last week, banks borrowed $164.8 billion from Federal Reserve funds, including a record $152.85 billion from the discount window and $11.9 billion from the Fed’s Bank Term Funding Program. The previous record of $111 billion in discount window borrowing was reached during the 2008 financial crisis. 
• The Federal Home Loan Bank System was also said to have raised $88.7 billion in a sale of short-term notes, far more than the $64 billion previously planned, according to people with knowledge of the matter.

SVB parent company files for Chapter 11

• SVB Financial Group, the parent company of Silicon Valley Bank, filed for bankruptcy on Friday. The bankruptcy protection request does not include Silicon Valley Bank, now operating under FDIC receivership as Silicon Valley Bridge Bank N.A., but the filing of the holding company may make the sale of its assets easier. 

32.8%

The drop in First Republic Bank shares on Friday after news of a $30 billion deposit injection by America’s largest banks failed to calm investors’ nerves about the stability of the institution. 

1) Timeline: The Shocking Collapse of Silicon Valley Bank

Dorothy Neufeld, Visual Capitalist

2) SVB’s Lack of Risk Officer Emerges as Focus in Fed Probe

Katanga Johnson et al., Bloomberg

3) Consumer Trust in Banks Remains High Despite Recent Bank Collapses

Amanda Jacobson Snyder, Morning Consult

4) A new surprise for U.S. savers: Turn 529s into retirement money

Chris Taylor, Reuters

5) Eleven Banks Deposit $30 Billion in First Republic Bank

 David Benoit et al., Reuters

6) US regulators protect Silicon Valley Bank depositors and shore up financial system

Colby Smith et al., Financial Times

7) Why Top Washington Officials Chose to Rescue SVB, Signature Depositors

 Andrew Ackerman et al., The Wall Street Journal

8) Romney grills Biden official about Social Security in tense exchange 

Aris Folley, The Hill

9) SEC Proposes New Cybersecurity Rules for Financial Firms

Paul Kiernan, The Wall Street Journal

10) 3 Lessons From Silicon Valley Bank’s Failure
Kevin Roose, The New York Times

• The Fed Was Too Late on SVB Even Though It Saw Problem After Problem (Bloomberg)
• Goldman Sachs bought SVB securities in sale that sparked failed capital raise (Financial Times)
• Biden emphasizes US banking system is safe after Silicon Valley Bank collapse (CNN)
• Biden’s private concerns, a rescue plan and the political firestorm that ensued (The Washington Post)
• US Regional Banks Remain Under Pressure as First Republic Sinks (Bloomberg)
• Signature Bank, former CEO are sued by shareholders for fraud (Reuters)
• Silicon Valley Bank Creditors Form Group in Advance of Possible Bankruptcy (The Wall Street Journal)
• Charles Schwab shares bought by CEO, Baron Capital (Reuters)
• Democrats, led by Warren and Porter, unveil bill to repeal Trump-era bank law (NBC News)
• Senator Brown Urges Fed to Tighten Bank Regulations, Pause Rate Hikes (Bloomberg)
• Long-awaited Fed digital payment system to launch in July (CNBC)