New York Community Bank, a regional bank in the United States, has recently experienced significant stock price volatility, with its share price **56% in a week, from 10$38 fell to 4$48. The root of this turmoil is the bank's financial report released on January 13, which showed that it lost 2$5.2 billion, compared to $1The $7.2 billion earnings were a stark contrast. The New York Community Bank blamed the loss on the acquisition of $40 billion worth of assets at Signature Bank, which was not immune to the collapse of Silicon Valley Bank. The New York Community Bank tried to reassure the market by stating that it had sufficient liquidity, but Moody's downgraded its credit rating to "junk" on Feb. 6, noting that the bank's exposure to the commercial real estate market had led to unexpected losses.
U.S. Treasury Secretary Janet Yellen also expressed concern about losses in the commercial real estate market, noting that smaller banks face concentration risks in this regard. She mentioned that the Fed is working to ensure that the financial system's loan loss reserves and liquidity levels are resilient to potential problems. However, New York Community Bank's loan loss provisions increased significantly in the fourth quarter, and Moody's downgrade made it more difficult to raise funds and increased debt pressure.
New York Community Bank is the parent company of Flagstar Bank, a large regional bank in the United States, with total assets of $116.3 billion, total loans of $85.8 billion, and total deposits of $81.4 billion at the end of 2023. Although it is not as large as Silicon Valley Bank, the crisis has once again exposed the fragility of the US banking sector. The Fed had previously injected liquidity into the banking system through the Bank Term Funding Program (BTFP), but with the BTFP due to expire on March 11, concerns about liquidity shocks have intensified. The Fed's reverse repo size is also continuing to decline, and it is expected that it may dry up in April or May.
The Fed is widely expected to cut interest rates in 2024, but the exact timing is not yet clear. The Fed may choose to cut interest rates or expand its balance sheet after March in response to a possible liquidity crisis. However, the expansion of the balance sheet in a high-interest rate environment may lead to the long-term*** Fed choice will have an important impact on the liquidity and economic outlook of the US financial markets and is worth keeping an eye on.