News & Analysis

The Carlyle Group's new chief executive says the banking system is demonstrating resilience amid recent high-profile bank collapses.

At the Milken Institute Global Conference on Monday, Carlyle CEO Harvey Schwartz said the morning's announcement of Jamie Dimon's rescue of First Republic Bank demonstrates that the banking system can handle institutional problems. In a panel discussion alongside asset management executives, Schwartz, who replaced interim CEO Bill Conway on Feb. 15, praised the failed bank's purchase.

"Today was a good day for the system and for the country," Schwartz said.

Regulators at the California Department of Financial Protection and Innovation seized First Republic Monday and sent it into a receivership with the Federal Deposit Insurance Corporation. The FDIC then entered into a purchase agreement with JP Morgan Chase, which assumed the deposits and assets of the failed regional bank. The agency estimates the collapse and transaction will cost its Deposit Insurance Fund around $13 billion.

This collapse and purchase came in the wake of two historic bank failures, Silicon Valley Bank and Signature Bank, which then sparked concerns about the overall health of the banking system and triggered a flight from regional banks. In March, total deposits at commercial US banks fell 21.8%, according to Federal Reserve data.

While Schwartz said JP Morgan's swift bid to purchase the assets of the failed bank signaled underlying strength in the banking system, other panelists expressed concern about its health. Yie-Hsin Hung, president and CEO of State Street Global Advisors, said investors aren't placing their bets on the overall resilience of the banking sector.

"This banking turmoil has had the effect of an interest-rate hike and then some," she said. "There is more underneath the surface that is potentially worrying, and investors should be wary moving forward."

While industry participants vary in their faith in the system, one question persists at the conference: Are there more failures to come?
 

Related read: JP Morgan wins First Republic; will it win over VCs and the startup world?