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Shockwaves from SVB collapse hit global bank stocks gripped by contagion fears

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U.S. bank stocks made sharp gains on Tuesday, recovering ground from lows triggered by the collapses of Silicon Valley Bank and Signature Bank which had prompted assurances from U.S. President Joe Biden and other global policymakers.

Worries about contagion risks from the collapse of the two U.S. banks had compounded investor concerns about the impact on lenders of rising interest rates, hitting bank shares in Asia and Europe as investors re-examined their risks.

An indicator of credit risk in the euro zone banking system hit its highest since mid-July, while ratings agency Moody’s cut its U.S. banking system outlook to negative from stable “to reflect the rapid deterioration in the operating environment.”

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Although the VIX volatility index, Wall Street’s “fear gauge,” neared six-month highs overnight, U.S. regional bank shares bounced, with First Republic Bank FRC.N up 52.7 per cent, a day after hitting an intraday record low of US$17.53.

“If we do not see any high-profile failures in the near future, then the fears would subside,” said Jack Ablin, chief investment officer at Cresset Capital.

Banking giants Citi, Wells Fargo and JP Morgan were also higher in the pre-market.

However, Moody’s said it was reviewing six lenders for a downgrade, including First Republic, Zions Bancorp, Western Alliance Bancorp and Comerica.

Europe’s banking index initially fell on Tuesday but recovered to rise 2.7 per cent, with some saying that banks in the region were less vulnerable, after the index posted its biggest percentage loss in more than a year on Monday.

“A critical difference between the European and U.S. systems, which will limit the impact across the Atlantic, is that European banks’ bond holdings are lower and their deposits more stable,” Moody’s said in a note.

Shares of embattled Credit Suisse initially fell as much as 4.5 per cent after it said customer “outflows stabilized to much lower levels but had not yet reversed” in its 2022 annual report. But the bank’s shares were up 1.2 per cent in the afternoon.

Asian banking stocks had earlier extended their declines, with Japanese banks hit particularly hard. The Bank of Japan said financial institutions there had sufficient capital buffers to absorb losses caused by external factors.

Investor worries about potential contagion to other lenders worldwide have not been entirely dispelled by Biden’s efforts to reassure markets and depositors or emergency U.S. measures to shore up banks by giving them access to additional funding.

“This is part of the process of the knob being turned to tighten financial conditions to make sure that we are on our way to normalizing a higher interest rate world,” Morgan Stanley co-president Edward Pick said on Tuesday. “But there might well be surprises, there might well be reactions.”

 

RATES RETHINK

A furious race to reprice interest rate expectations also buffeted markets as investors bet the U.S. Federal Reserve will be reluctant to hike next week.

Traders currently see a 50 per cent chance of no rate hike at that meeting, with rate cuts priced in for the second half of the year. Early last week, a 25-basis point hike was fully priced in, with a 70 per cent chance seen of 50 basis points.

Short-end yields in the euro zone tumbled again as investors bet the European Central Bank would moderate its policy tightening at Thursday’s meeting, with chances of a Bank of England hike next week also seen receding.

Italian Banking Association head Antonio Patuelli told Il Corriere della Sera he hoped that in the wake of the SVB collapse “the ECB will do more thinking than the already announced decision to raise rates further.”

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Yunosuke Ikeda, chief equity strategist at Nomura Securities, said the shift to much less aggressive Fed hike expectations had also tempered the outlook for an eventual pivot in Japan away from ultra-low interest rates.

The prospect of higher rates had been “the reason investors have been really excited about Japan bank stocks,” Ikeda added.

Analysts say uncertainty continues to dog the financial sector, with investors extremely worried about the health of smaller global banks, the prospect of tighter regulation and a preference to protect depositors at the expense of shareholders.

A wave of customers have applied to shift their accounts to large U.S. banks such as JPMorgan Chase and Citigroup from smaller lenders after SVB’s collapse, the Financial Times reported on Tuesday.

Major U.S. banks have lost nearly US$190 billion since the sell-off began, with regional lenders like First Republic Bank, which plunged more than 60 per cent on Monday, hit hardest.

Biden said on Monday his administration’s emergency measures meant Americans could be confident the U.S. banking system is “safe,” while also promising stiffer regulation after the biggest U.S. bank failure since the 2008 financial crisis.

Regulator FDIC had moved swiftly to close New York’s Signature Bank SBNY.O as well as taking control of SVB.

The Republican head of the U.S. House Financial Services Committee also sought to shore up support for the banking system, saying on Tuesday that both the FDIC and the Fed had acted within the law. He said he still planned to hold a hearing and review documents, although no date was announced.

 

OPEN FOR BUSINESS

In a letter to clients, SVB’s new CEO Tim Mayopoulos said it was conducting business as usual within the United States and expected to resume cross-border transactions in coming days.

“I recognize the past few days have been an extremely challenging time for our clients and our employees,” said Mayopoulos, a former CEO of federal mortgage finance firm Fannie Mae who was appointed by the FDIC to run SVB.

U.S. bank regulators sought to reassure nervous customers who lined up outside SVB’s Santa Clara, California, headquarters on Monday, offering coffee and donuts.

“Feel free to transact business as usual. We just ask for a little bit of time because of the volume,” FDIC employee Luis Mayorga told waiting customers.

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Former crypto mogul Sam Bankman-Fried sentenced to 25 years in prison – Al Jazeera English

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Bankman-Fried, 32, sentenced for fraud on customers of the FTX cryptocurrency exchange he founded.

Former crypto tycoon Sam Bankman-Fried has been sentenced to 25 years in United States federal prison for stealing $8bn from customers of the now-bankrupt FTX cryptocurrency exchange he founded.

US District Judge Lewis Kaplan handed down the sentence at a Manhattan court hearing on Thursday after rejecting Bankman-Fried’s claim that FTX customers did not actually lose money and accusing him of lying during his trial testimony.

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A jury found Bankman-Fried, 32, guilty on November 2 on seven fraud and conspiracy counts stemming from FTX’s 2022 collapse in what prosecutors have called one of the biggest financial frauds in US history.

“He knew it was wrong,” Kaplan said of Bankman-Fried before handing down the sentence. “He knew it was criminal. He regrets that he made a very bad bet about the likelihood of getting caught. But he is not going to admit a thing, as is his right.”

Bankman-Fried stood with his hands clasped before him as Kaplan read the sentence.

Kaplan said the sentence reflected “that there is a risk that this man will be in position to do something very bad in the future. And it’s not a trivial risk at all.”

Prior to sentencing, Bankman-Fried stood and apologised. “A lot of people feel really let down. And they were very let down. And I’m sorry about that. I’m sorry about what happened at every stage,” he said.

“My useful life is probably over. It’s been over for a while now, from before my arrest.”

Sam Bankman Fried
Sam Bankman-Fried, centre left, is escorted out of Magistrate Court following a hearing in Nassau, Bahamas, Dec. 19, 2022 [File: Rebecca Blackwell/AP Photo]

Al Jazeera’s Kristen Saloomey, reporting from New York, said that Bankman-Fried could have received up to 110 years behind bars for his crimes and that the 25-year sentence was less than the 40-50 years that prosecutors were seeking.

“Given the scale of this crime, one of the largest frauds in history, the judge took a very strong stance but also showed some flexibility… perhaps based on the arguments made by Bankman-Fried’s lawyers and his family that he had always intended to do good”, she said.

Bankman-Fried had billed himself as a proponent of effective altruism – finding the best way to help other people, in particular by donating all or part of one’s wealth to charity rather than, say, volunteering at a soup kitchen.

When the cryptocurrency world lurched into crisis in the spring of 2022, he bought shares in the troubled platform BlockFi and another troubled company, Voyager.

However, prosecutors have said the responsible image he cultivated concealed his years-long embezzlement of customer funds.

“The defendant victimised tens of thousands of people and companies, across several continents, over a period of multiple years. He stole money from customers who entrusted it to him” prosecutors said in a court filing.

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Gas prices in the Thompson Okanagan jumped by 7 cents a litre, days before the next carbon tax increase – Vernon News – Castanet.net

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Some area gas stations are not waiting until April 1 to crank up the price of gas.

On April Fools Day, the federal Liberals will be increasing the controversial carbon tax, which will directly impact the price at the pump.

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However, overnight, several Thompson Okanagan gas stations have already increased the price, selling the liquid gold for 174.9.

In January, gas was selling for a ‘mere’ 143.9 cents a litre. The latest hike is a whopping 31-cent-a-litre increase in just three months.

And the price of petrol is guaranteed to go up again when the carbon tax increase is implemented on Monday.

Kelowna drivers are also paying more at the pump today, with the majority of stations raising the price to 174.9.

As of 9:30 Thursday morning, the Co-op stations on Rutland and Sexsmith roads were at 168.9 as was the Costco gas station.

Several Vernon stations are holding at 167.9.

In Penticton, motorists are also paying more, with the price at the majority of stations hitting the 174.9 mark.

Kamloops drivers are also taking a hit to the wallet with gas in the Thompson community also selling for 174.9.

The Kamloops Costco was the cheapest in the city at 161.9 cents a litre.

Enderby continues to have some of the cheapest gas in the region at 165.9, however the Esso in Tappen has them all beat at 157.9.

Gas in Vancouver has crested the $2 a litre mark, sitting at 202.9 cents a litre.

And as usual, Calgary motorists are paying significantly less than their BC counterparts, filling up for 154.9 cents a litre.

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Calgary breaks all-time record in housing starts but increasing demand keeps inventory low – CBC.ca

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Soaring housing demands in Calgary led to an all-time record for new residential builds last year, but inventory levels of completed and unsold units remained low due to demand outpacing supply.

According to the latest report from Canada Mortgage and Housing Corporation (CMHC), total housing starts increased by 13 per cent in Calgary, reaching a total of 19,579 units with growth across all dwelling types in the city.

That compares to a decline of 0.5 per cent overall for housing starts in the six major Canadian cities surveyed by CMHC.

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Calgary also had the highest housing starts by population.

“Part of the reason why we think that might have happened is that developers are responding to low vacancies in the rental market,” said Adebola Omosola, a housing economics specialist with CMHC.

“The population of Calgary is still growing, a record number of people moved here last year, and we still expect that to remain at least in the short term.”

Earlier this year, the Calgary Real Estate Board also predicted that demand, especially for rental apartments, wouldn’t let up any time soon. 

Industry can cope with demand, expert says

According to numbers from the report, average construction times were higher in 2023 for all dwelling types except for apartments.

The agency’s report suggests the increase in the number of under-construction residential projects might mean builders are operating at or near full capacity.

However, there’s optimism the construction industry can match the increasing need.

Brian Hahn, CEO of BILD Calgary Region, said despite concerns around about construction costs, project timelines and labour shortages, the industry has kept up with the demand for new builds.

Demand is expected to remain robust, but the construction industry can keep up, according to BILD Calgary region CEO Brian Hahn.
Demand is expected to remain robust, but the construction industry can keep up, according to BILD Calgary Region chief executive officer Brian Hahn. (Shaun Best/Reuters)

“I’ve heard that kind of conversation at the end of 2022 and I heard it in 2023,” Hahn said.

“Yet here we are early in 2024, and January and February were record numbers again.”

Hahn added he believes the current pace of construction will continue for at least the next six months and that the industry is looking at initiatives to attract more people to the trades.

Increase in row house and apartment construction

Construction growth was largely driven by new apartment projects, making up almost half of the housing starts in Calgary in 2023.

The federal housing agency says 9,034 apartment units were started that year, an increase of 17 per cent from the previous year. Of those, about 54 per cent were purpose-built rentals.

Apartments made up around two-thirds of all units under construction, CMHC said, with the total number of units under construction reaching 23,473.

Growth, however, was seen across all dwelling types. Row homes increased by 34 per cent from the previous year while groundbreaking on single-detached homes grew by two per cent.

“Notwithstanding challenges, our members and the industry counterparts that support them managed to produce a record amount of starts and completions,” Hahn said.

“I have little doubt that the industry will do their very best to keep pace at those levels.”

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