The financial crisis in the United States right now puts medium-sized banks at the center of the target. The owners of these entities are constantly wondering which will be the next to close its doors, regarding the current context.
One that has been resurrected in recent days was First Republic Bank thanks to an urgent injection of capital. Eleven Wall Street banks banded together and donated $30 billion to prevent First Republic from shutting down.
Experts agree that at the moment it is a weak bank because it has suffered the same flight of clients as those already sunk. Let’s not forget that in a few days several prestigious banks fell, these are Silicon Valley, Signature and Silvergate Capital Corp. in the United States. The same thing happened to Credit Suisse in Europe.
Actions look at the ground
This is precisely one of the key reasons why First Republic Bank is in the spotlight. Its shares have fallen, dramatically, almost 87% over the past two weeks. Meanwhile, distrust grows among clients after analyzing the real instability of the stock market in recent days.
“Today people can withdraw deposits from the banking system with the speed and fervor of those trying to buy Taylor Swift concert tickets.” So jokingly commented on the subject Paul Donovan, chief economist at UBS Global Wealth Management.
“The economic environment makes people lose confidence in banks and choose to withdraw their money, as is happening now. And that’s not good. A bank’s deposits are the gasoline they need to function,” Víctor Alvargonzález, director of strategy and founding partner of the bank, told BBC Mundo. Nextep Finance.
The enormous risk is that the banks suffer a mass withdrawal of clients, as has already happened. When this happens, the financial institution is exposed and goes bankrupt automatically.
A key element to analyze is the indicator of economic growth. It is known that lending standards have tightened in both Europe and America. Banks have increased the requirements to grant a loan to their clients. This is a symptom that denotes the current slowdown in economic growth.
