In the Market: Fed beware the banking crisis of March

STORY CONTINUES BELOW THESE SALTWIRE VIDEOSWatch on - Cadence Bank CEO Dan Rollins calls the regional banking crisis from earlier this year"March madness." Six months on, the craziness has abated, but the industry is scarred and still dealing with its consequences.

Taken together, the lingering effects of the crisis complicate the U.S. Federal Reserve's calculus as it walks a fine line on interest rates, increasing the chance it might over-correct. Torsten Slok, chief economist at Apollo Global Management, said the banking crisis had"a magnifying effect" on the Fed's tightening but its full impact would come with a lag.Slok said the impact so far can be seen in data: Fed data, for example, shows while large banks started to pull back on credit when the central bank started raising rates last year, small banks continued to increase loans and leases until Silicon Valley Bank collapsed in March.

Steve Wyett, chief investment strategist at Tulsa, Oklahoma-based BOK Financial, said their deposit beta, a measure of the sensitivity of deposit costs to changes in short-term interest rates, had shot up. "It created a very attractive funding source," Chesler said."We used it purely from an economic standpoint because we have plenty of liquidity."

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In the Market: Fed beware the banking crisis of MarchCadence Bank CEO Dan Rollins calls the regional banking crisis from earlier this year 'March madness.' 'We don't want an asset that doesn't come with a full wallet,' Rollins said, referring to a trend since the crisis where banks want customers who want loans to also bring them their deposits. Rollins' southeastern regional bank is not alone.
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