(NEW YORK) — Bank stocks in the U.S. and Europe tumbled on Wednesday as the global financial system continued to reckon with the Silicon Valley Bank collapse, the largest bank failure since 2008.
Shares of Credit Suisse fell more than 26% in early trading after a top backer said he would not be able to provide any more cash to support the Swiss bank.
The pressure on the banking industry appeared to strain some of the largest U.S. banks, too.
Citi fell nearly 5% on Wednesday morning while J.P. Morgan Chase and Wells Fargo each dropped nearly 4%.
The downward trend hammered the major stock indexes. The Dow Industrial Average fell more than 500 points, which amounts to a 1.3% decline; the S&P 500 and Nasdaq each fell about 1.5%.
The banking sector’s struggles mark the latest sign of fallout from the fall on Friday of Silicon Valley Bank, the 16th-largest bank in the U.S. Two days later, Signature Bank, the nation’s 29th-largest bank, closed its doors, suggesting the financial panic had spread.
Many bank stocks plummeted at the outset of this week but rallied on Tuesday, regaining much of their losses. The broad decline in early trading on Wednesday renewed fears of damage to the wider financial system.
The turn downward follows news on Tuesday that the Justice Department and the Securities and Exchange Commission are probing the fall of Silicon Valley Bank.
The Federal Reserve Board, the governing body of the Fed, announced a day earlier that it would launch a review of the “supervision and regulation of Silicon Valley Bank, in light of its failure.”
The second-biggest bank failure in U.S. history triggered a major government intervention to protect the financial system.
The Federal Deposit Insurance Corporation, which protects the stability of the financial system, took over Silicon Valley Bank on Friday in an effort to protect depositors.
Fearing a wider spread of the crisis after the collapse of Signature Bank, the FDIC, the Treasury Department and the Fed took further action on Sunday, telling depositors in both fallen banks that the FDIC would protect all of their funds, including those that exceed its $250,000 limit.
Later that day, the Fed announced an emergency lending program to cover the deposits at issue and restore wider confidence in the financial system.
Still, the worldwide fallout in the banking sector appears ongoing.
France’s two largest international banks, Societe Generale SA and BNP Paribas SA, fell more than 10% on Wednesday. Deutsche Bank AG, a top German lender, plummeted 8%.
Some financial institutions were spared, however. Schwab, the eighth-largest U.S. bank, ticked up almost 3%.
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