The US financial market just experienced a fiery day when two large regional banks – Zions Bancorp and Western Alliance Bancorp – simultaneously announced serious incidents related to fraudulent loans, causing investors to worry about the possibility of a credit crisis spreading in the banking system.
According to information released on October 16, Zions Bancorp – a Utah-based bank – discovered two commercial loans with signs of serious fraud, estimated to cause losses of 50-60 million USD. Specifically, the borrowers were accused of falsifying mortgage documents, misrepresenting the value of assets, and violating the credit agreement. The case is now being sued by Zions in the state of California to recover the debt and collateral.
Shortly after, Western Alliance Bancorp, a regional bank headquartered in Arizona, also confirmed that it was suing a corporate client for financial fraud and forged property ownership documents. According to sources close to the case, it could cost Western Alliance tens of millions of dollars, raising concerns about the financial health of regional banks in the US, which have been under pressure since the beginning of this year.
These events come on the heels of the shocking bankruptcies of Tricolor Holdings, a subprime auto lender, and First Brands, a major auto parts manufacturer in the US. Both companies were heavily indebted to regional banks, raising concerns about the ripple effects in the credit system.
Analysts previously dismissed the failures of Tricolor and First Brands as localised risks in the consumer and manufacturing sectors, but now that major banks have been caught up in the problems, the market is starting to see a systemic problem.
In the latest trading session, Zions and Western Alliance stocks both plunged, dragging down regional financial indices. US stocks lost ground, while Treasury bonds and gold rose as safe-haven money returned.
Meanwhile, the crypto market could not escape the panic. Bitcoin plummeted to $106,000, losing nearly $2,000 more in just a few hours of trading. Ethereum fell 6% to $3,900, while BNB and altcoins were all in the red, down 8-15%.
The “liquidation storm” has not stopped yet. According to the latest data from Coinglass, in the past 24 hours alone, nearly $995 million in trading positions have been “blown away”, of which up to 80% were Longing orders. Since the beginning of the month, an estimated $19 billion has been liquidated – and according to many experts, the actual figure could be 20 times higher, equivalent to about $400 billion, if unrecorded OTC and Derivative transactions are included.
This situation has caused many small investors to “lose money”, while large hedge funds still maintain the strategy of “selling to buy cheap goods”. An analyst in New York said: “We are seeing a similar scenario in 2022 – when the market is squeezed by liquidation, crypto plunges, and then a strong recovery cycle.”
