While depositors of Silicon Valley Bank breath a sigh of relief, investors are on the hunt for the next weakest link. And Charles Schwab is under watch.
The hope was the Federal Reserve and US Treasury’s intervention to make depositors of Silicon Valley Bank whole would act as a definitive circuit breaker for what threatened to escalate into a full-blown banking crisis.
Charles Schwab, the giant brokerage wealth management platform, closed about 12 per cent lower overnight. Schwab shares had been down as much as 25 per cent after it reassured investors it had sufficient liquidity to meet any deposit withdrawals. The institution is losing deposits while it moves more of its assets into its hold to maturity book. As its liquidity depletes,Silicon Valley Bank became the largest US bank failure in more than a decade last week.Schwab, like many brokers, should be a major benefactor from higher interest rates. This is because it gathers deposits from its retail investor client base, for which it pays very little, who hold cash when they’re deciding what to buy.
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