Larger banks have much stronger capital positions vis-à-vis the global financial crisis. SVB was particularly exposed to the slump in technology/VC and did not hedge Treasury risk exposure. Signature Bank had significant exposure to cryptocurrency.
Nevertheless, a pragmatic approach had to be taken by regulators, despite the idiosyncrasies of these two banks. The risks of contagion were too large.
Despite the announcement of the BTFP and full protection of all deposits, Treasury yields continue to slide this morning. This rally in Treasuries looks overdone. The Fed will probably still hike 25 basis points at its next meeting.
But the bear market in the S&P 500 is not over. The technology sector will continue to suffer. Risks remain in more unregulated parts of the market, including private equity, private credit, life insurers, etc. The failure of SVB may indeed bring greater scrutiny of PE exposure to technology companies, and CRE. The private credit ETF tumbled on Friday. Commercial real estate prices continue to fall, down another 1.4% m/m in February and 25% y/y.
