Winners of 2023 Bank Crisis Are Finding the New Spotlight Harsh

Two regional banks emerged as winners last year as deposit runs shook their industry. Their fortunes have diverged since: New York Community Bancorp Inc. required a frantic rescue last month. First Citizens BancShares Inc. has stretched its rally to more than double in value.

But behind the scenes, even the stock-market winner has to deal with the growing pains that have come to define a group of lenders big enough to warrant greater scrutiny from watchdogs, yet still far smaller than their megabank rivals.

First Citizens, which bought Silicon Valley Bank a year ago, is privately trying to satisfy demands from the Federal Reserve including bolstering its internal governance to better fit its rapid growth, according to people with knowledge of the matter.

The concerns at First Citizens have been less severe than the pressure that bore down on NYCB this year — ultimately forcing that firm to raise more than $1 billion in capital — and are more in line with an industrywide crackdown following last year’s failures. The situation underscores the difficulty regional banks face as they grow, especially through acquisitions.

How thousands of regional banks and their various watchdogs navigate the situation will have broad implications for the future of American finance. Small banks need to merge and bulk up so that they can compete with the industry’s too-big-to-fail giants. But to do that, executives face myriad challenges: capital rules that become more stringent as balance sheets grow, divergent approaches by regulators and an unforgiving market for lenders that make missteps along the way.