First Republic, Bank Stocks Leap As Treasury Secretary Yellen Hints At Expanded Deposit Support
Treasury Secretary Janet Yellen said "similar actions" to the deposit guarantees for Silicon Valley Bank and Signature Bank "could be warranted if similar institutions suffer deposit runs that pose the risk of contagion".
Treasury Secretary Janet Yellen said "similar actions" to the deposit guarantees for Silicon Valley Bank and Signature Bank "could be warranted if similar institutions suffer deposit runs that pose the risk of contagion".
Updated at 8:59 am EST
U.S. banking stocks powered higher Tuesday, building on gains from the Monday session and adding to a noted improvement in broader market sentiment, after Treasury Secretary Janet Yellen suggested officials could offer extended support to American depositors.
In prepared remarks for a speech she'll deliver to the American Bankers Association conference later today, Yellen defended moves by the Treasury, in concert with the Federal Deposit Insurance Corporation, to guarantee deposits at the failed Silicon Valley Bank and Signature Bank earlier this month, noting that "similar actions could be warranted if similar institutions suffer deposit runs that pose the risk of contagion".
Her remarks follow a report from Bloomberg that suggests the Treasury is studying options that would allow for a temporary guarantee of all U.S. deposits, possibly by leveraging the Exchange Stabilization Fund, without the need for Congressional approval.
At present, the FDIC provides deposit protection up to $250,000 per account, although that limit was increased by the Treasury to protect customers at the failed Silicon Valley Bank and can be lifted if needed to protect an institution the Treasury deems systemically important.
"Let me be clear: The government's recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors' savings and the banking system remain safe," Yellen will say.
First Republic (FRC) - Get Free Report shares, which remain mired in headline risk amid reports of a potential capital increase and further credit downgrades following its $30 billion deposit boost last week, were marked 28.8% higher in pre-market trading to indicate an opening bell price of $15.69 each.
Western Alliance (WALPL) shares, meanwhile, rose 6.9% to $31.23 each while Pacwest Bancorp (PACW) - Get Free Report jumped 7.2% to $11.02 each.
The Mid-Size Bank Coalition of America, a lobby group, is also seeking a blanket deposit guarantee that lasts for at least two years, while Democratic Senator Elizabeth Warren, a vocal critic of U.S. banking regulations, is asking Congress to lift the cap on FDIC insured deposits, potentially to as high as $10 million, in order to truly stem the regional banking sector crisis.
"Small businesses need to be able to count on getting their money to make payroll, to pay the utility bills," Warren told CBS's 'Face The Nation' program Sunday. "Nonprofits need to be able to do that. These are not folks who can investigate the safety and soundness of their individual banks. That's the job the regulators are supposed to do."
Last week, in an effort to ease concerns over the health of U.S. bank deposits, the Fed launched a new bank lending program, which offers unlimited funds -- if backed by high quality collateral -- to stressed U.S. lenders.
Those securities will not be subject to the usual discount, or haircut, when used as loan collateral, the Fed said, allowing U.S. banks to get fast cash based on their full par value.
Banks are sitting on an estimated $620 billion of unrealized losses from Treasury, agency and MBS bonds following the surge in market interest rates that has swamped fixed income portfolios worldwide.
Big bank stocks were also on the move Tuesday, with JPMorgan (JPM) - Get Free Report rising 1.8% to $129.40 each and Bank of America (BACXL) jumping 2.3% to $28.38 each amid improving sector sentiment.
Risk sentiment indicators do appear to have improved, however, with benchmark 2-year Treasury note yields rising past 4% in overnight trading, and last seen at 4.126%, while 10-year note yields were pegged at 3.575%.
Market volatility gauges were also in retreat, with the CBOE Group's VIX index falling 5.7% in the early session to 22.7 points. The U.S. dollar index, meanwhile, was marked 0.18% lower against a basket of six global currency peers and trading at 103.192.
On Wall Street, futures contracts tied to the S&P 500 are indicating a 35 point opening bell gain while those linked to the Dow Jones Industrial Average were looking at a 306 point advance. The tech-focused Nasdaq is looking at more modest 77 point gain amid the bump in Treasury bond yields.
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