The financial crisis in the United States is currently putting medium-sized banks in the spotlight

USA Diario
The financial crisis in the United States is currently putting medium-sized banks in the spotlightPhoto byUSA Diario

The owners of these institutions are constantly wondering which will be the next to close their doors, given the current context.

One that was revived in the last few days was First Republic Bank, thanks to an urgent capital injection. Eleven Wall Street banks joined forces and donated $30 billion to prevent First Republic from closing its operations.

Experts agree that at this moment it is a weak bank because it has suffered the same customer drain as the already collapsed banks. Let us not forget that in a few days several prestigious banks have collapsed, such as Silicon Valley, Signature and Silvergate Capital Corp. in the United States. The same happened to Credit Suisse in Europe.

Stocks look to the ground

This is precisely one of the key reasons why First Republic Bank is in the spotlight. Its shares have fallen, drastically, by almost 87% over the last two weeks. Meanwhile, distrust is growing among customers after analyzing the real instability of the stock market in recent days.

"Currently people can withdraw deposits from the banking system with the speed and fervor of those trying to buy Taylor Swift concert tickets." So jocularly commented on the subject Paul Donovan, chief economist at UBS Global Wealth Management.

"The economic environment makes people lose confidence in banks and opt to take their money out, as is happening now. And that's not good. A bank's deposits are the gasoline they need to function," Víctor Alvargonzález, strategy director and founding partner of Nextep Finance, told BBC Mundo.

The huge risk is that banks will suffer a mass outflow of customers, as has already happened. When this happens, the financial institution is exposed and automatically goes bankrupt.

A key element to analyze is the economic growth indicator. It is known that lending standards have tightened in both Europe and America. Banks have increased the requirements for lending to their customers. This is a symptom of the current slowdown in economic growth.

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