Polo Rocha

Industry leaders hoped that the emergency sale of First Republic Bank would quell investors' fears, but many banks saw big stock price declines on Tuesday. The instability could put pressure on lawmakers and policymakers to take more decisive action.

An emergency deal for First Republic Bank will help boost JPMorgan's wealth management business. But company executives acknowledge that there are questions about how many of the failed bank's clients and wealth advisors it will be able to retain.

First Republic Bank was shuttered by regulators early Monday, and all its deposits and most of its assets were acquired by JPMorgan. San Francisco-based First Republic was undone by low-rate mortgages it made to its wealthy customers as well as by the fallout from last month's banking crisis.

The troubled lender could fail, get rescued by the nation's largest banks or muddle through as a zombie bank. Federal regulators and the big banks will have to decide which is the least bad option.

Some 77% of banks did not did not record significant deposit inflows or outflows following Silicon Valley Bank's failure, according to a survey of executives at 567 institutions. The findings highlight the stability of many smaller banks' deposit bases.

Banks with more than $100 billion of assets expect tougher regulations in the wake of last month's bank failures. They say that any changes to capital and liquidity standards should happen gradually in order to avoid spooking investors.

The San Francisco bank, on shaky ground after two regional peers failed last month, said that customers pulled more than 40% of their deposits last quarter. It's been forced to turn to more expensive sources of funding, which analysts said will squeeze its profitability.

The Cleveland-based regional bank said that its net interest income fell 10% — and profits declined by an even larger percentage — as it paid more to retain depositors. Still, CEO Chris Gorman said the company is "well prepared to handle the deposit challenges in front of the market."

Charles Schwab's underwater securities portfolio has prompted some analysts to lump it together with Silicon Valley Bank. CEO Walt Bettinger says those views are vastly mistaken.

The San Francisco bank identified "signs of weakness" and increased its loan loss reserves substantially. Small and midsize banks have significantly larger exposures than Wells does to the office segment, which has been hit by changing work habits.