https://sputnikglobe.com/20240429/is-republic-first-banks-collapse-a-harbinger-of-a-new-wave-of-us-banking-crisis-1118181962.html
Is Republic First Bank's Collapse a Harbinger of a New Wave of US Banking Crisis?
Is Republic First Bank's Collapse a Harbinger of a New Wave of US Banking Crisis?
Sputnik International
One year after Silicon Valley Bank collapsed in just 48 hours, US regulators closed another regional lender, Republic First Bank, which operated in Pennsylvania, New Jersey and New York.
2024-04-29T19:09+0000
2024-04-29T19:09+0000
2024-04-29T19:09+0000
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Republic First Bank is the first financial institution insured by the Federal Deposit Insurance Corp. (FDIC) to fail this year in the US.According to FDIC's estimates, the lender's collapse will cost its Deposit Insurance Fund $667 million. Fulton Bank, a subsidiary of Fulton Financial Corp., assumed all of the deposits and purchased all of the assets of Republic Bank.The closure of the lender evoked memories of the 2023 banking crisis and underlines the challenges faced by smaller regional banks amid the Federal Reserve's longstanding fight with inflation, persistently high interest rates, decline in deposits, struggling mortgage lending business and falling commercial real estate values.Republic First's seizure followed the collapse of three larger regional banks in 2023: Silicon Valley Bank, Signature Bank and First Republic Bank. While the US press raised fears of a "domino effect" last year, the New York Times rushed to assure its readers that no such crash would happen in the foreseeable future.The NYT quoted Feddie Strickland, a bank analyst at Janney Montgomery Scott, who said that the lender's failure appeared to be an "isolated incident."But the Chinese media was unconvinced by the optimistic stance of the American financial analyst.Although Republic First is a relatively small bank, its sudden collapse indicates that the US regional bank crisis may still be far from over, given that the Federal Reserve's interest rates remain elevated at a range from five to 5.25 percent, wrote Chinese English-language daily Global Times.The newspaper pointed to two other US regional banks, PNC Financial and M&T Bank, which reported double-digit profit slumps in the first three months this year as a result of the Fed's monetary policy.The negative trend is unlikely to change as "US inflation exceeded expectations for a third month in a row, hopes for a rate cut in the short term have been dashed," the Chinese daily pointed out.The Chinese are closely monitoring the situation concerning the US financial system, given that the two economies remain deeply intertwined despite the Trump and Biden administrations' decoupling efforts.In the wake of last year's banking crisis in the US, China reduced its holdings of US Treasury bonds. By September 2023, the People's Republic stash of Treasuries slid to $821.8 billion and the next month to $763.5, the lowest since May 2009. Although Beijing's holdings of Treasuries rose to $816.3 at the start of 2024, the People Republic continues to tread carefully — worried by a lack of stability in the US financial system, the Fed's aggressive monetary policy and the erosion of the dollar's dominance worldwide.
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republic first bank collapse, silicon valley bank, us banking crisis, us inflation, federal reserve's high interest rates, us financial instability. us treasury bonds, us regional banks collapsing
republic first bank collapse, silicon valley bank, us banking crisis, us inflation, federal reserve's high interest rates, us financial instability. us treasury bonds, us regional banks collapsing
Is Republic First Bank's Collapse a Harbinger of a New Wave of US Banking Crisis?
One year after Silicon Valley Bank collapsed in just 48 hours, US regulators closed another regional lender, Republic First Bank, which operated in Pennsylvania, New Jersey and New York.
Republic First Bank is the first financial institution insured by the Federal Deposit Insurance Corp. (FDIC) to fail this year in the US.
According to FDIC's estimates, the lender's collapse will cost its Deposit Insurance Fund $667 million. Fulton Bank, a subsidiary of Fulton Financial Corp., assumed all of the deposits and purchased all of the assets of Republic Bank.
The closure of the lender evoked memories of
the 2023 banking crisis and underlines the challenges faced by smaller regional banks amid the Federal Reserve's longstanding fight with inflation, persistently high interest rates, decline in deposits, struggling mortgage lending business and falling commercial real estate values.
Republic First's seizure followed the collapse of three larger regional banks in 2023: Silicon Valley Bank, Signature Bank and First Republic Bank.
While the US press raised fears of a "domino effect" last year, the New York Times rushed to assure its readers that no such crash would happen in the foreseeable future.
The NYT quoted Feddie Strickland, a bank analyst at Janney Montgomery Scott, who said that the lender's failure appeared to be an "isolated incident."
"I think small banks are in good shape," Strickland told the newspaper. "Some of the failures we saw last year were really banks with a certain specialization. I think there’s an importance of being diversified."
But the Chinese media was unconvinced by the optimistic stance of the American financial analyst.
Although Republic First is a relatively small bank, its sudden collapse indicates that the US regional bank crisis may still be far from over, given that the Federal Reserve's interest rates remain elevated at a range from five to 5.25 percent, wrote Chinese English-language daily Global Times.
The newspaper pointed to two other US regional banks, PNC Financial and M&T Bank, which reported double-digit profit slumps in the first three months this year as a result of the Fed's monetary policy.
The negative trend is unlikely to change as "US inflation exceeded expectations for a third month in a row, hopes for a rate cut in the short term have been dashed," the Chinese daily pointed out.
"More worrying, the Fed seems to have no clue about how to address the messy situation," the publication added.
The Chinese are closely monitoring the situation concerning the US financial system, given that the two economies remain deeply intertwined despite the Trump and Biden administrations' decoupling efforts.
In the wake of last year's banking crisis in the US, China
reduced its holdings of US Treasury bonds. By September 2023, the People's Republic stash of Treasuries slid to $821.8 billion and the next month to $763.5, the lowest since May 2009.
Although Beijing's holdings of Treasuries rose to $816.3 at the start of 2024, the People Republic continues to tread carefully — worried by
a lack of stability in the US financial system, the Fed's aggressive monetary policy and
the erosion of the dollar's dominance worldwide.
