Less than a year after the Bank of Silicon Valley went out of business, another bank issued a crash warning: When will the Federal Reserve slow down QT as liquidity is running out?

Before the market on Wednesday, January 30th EST,$New York Community Bancorp (NYCB.US)$The fourth quarter earnings report showed an unexpected loss of US$260 million, while analysts had previously expected profit of US$206 million; loss of $0.36 per share, and earnings per share (EPS) changed from profit to loss year-on-year. Meanwhile, the NYCB announced a 5 cent dividend cut, far short of analysts' expectations to keep the dividend at 17 cents.

After the financial report was announced, NYCB jumped 42.6% lower. At the beginning of the session, it fell more than 46%, closing down 37.7%, the biggest intraday and closing decline since its launch in November 1993, far exceeding the bank's biggest decline during the 2008 global financial crisis, completely erasing the gains it “won” during the “Silicon Valley Bank Crisis” last year.

Judging from financial data, the biggest reason for NYCB's losses this quarter was that the bank's loan loss provision for the quarter reached 552 million US dollars, far exceeding market expectations and 62 million US dollars in the previous quarter, indicating a deterioration in credit prospects.

Jon Arfstrom, an analyst at RBC Capital Markets, said in a report to clients that NYCB's management had previously stated that the asset quality was strong, so “their tone has clearly changed.”

“It was a substantial negative accident.”

The storm in NYCB's earnings report made the market think once again of the systemic banking crisis caused by the collapse of Silicon Valley Bank last year.

At the time, due to the Federal Reserve's continuing intense interest rate hikes, the market price of financial assets such as bonds held by the Bank of Silicon Valley continued to fall, and they were in a hurry to adjust their asset portfolios, but the disclosure of loss information triggered fears among depositors. There was a rush to be overrun, and finally it was completely crushed by withdrawal requirements of up to 42 billion US dollars in a single day.

For NYCB, the problem this time is liquidity panic — the Federal Reserve announced last week that the Emergency Bank Rescue Facility (BTFP) will not expire, and regional banks in the US face the risk of running out of liquidity.

However, Wall Street News previously analyzed that BTFP's failure to expire may only be part of the Federal Reserve's “March drama”. Repurchase rates have begun to “occasionally” jump, and overnight reverse repurchases (ON RRP) in March are being exhausted, all suggesting that liquidity risks may erupt intensively next.

At the beginning of the year, US Dallas Federal Reserve Chairman Logan said that although liquidity and bank reserves in the financial system are still very sufficient, individual banks may begin to experience tight liquidity, especially when the Federal Reserve's overnight reverse repurchase agreement usage declines.

Logan's statement ignited speculation that the Federal Reserve is slowing down the pace of contraction (QT), and liquidity is beginning to become a “new policy target” that the market is focusing on.

Overnight at the FOMC interest rate meeting in January, the Federal Reserve stood still as scheduled. Chairman Powell said at a subsequent press conference that although the Fed has not yet reached the level of confidence to start cutting interest rates in March, it plans to begin in-depth discussions on balance sheet issues in March.

At the meeting, Powell said that the downsizing process has progressed well since this round of austerity, and there is no need to wait until the overnight reverse repurchase agreement (RRP) is completely reduced to zero before slowing down the downsizing process.

Editor/Somer