It is unclear how long some regional banks in the United States can muddle through without a deal.
First Republic’s shares have fallen 80% since March 8, when the crisis started, while PacWest shares are down 65%.The five sources, who work at or with major banks and private equity firms and examined such deals, told Reuters that they have decided not to participate for now for fear they could be hit with losses in the investment portfolios and loan books.
They are worth less than what the banks value them on their books because of a steep rise in interest rates. Some of the loan books of these banks are also underwater, due to high rates and concerns about an economic slowdown. The Federal Deposit Insurance Corporation, which insures deposits and manages receiverships, told banks mulling offers in the auctions for SVB and Signature Bank on Friday, March 17, that it was considering retaining some of the assets that are underwater at the failed lenders. Such a backstop, however, is typically reserved for banks taken over by the FDIC.
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