Bank of Silicon Valley collapse shakes financial market confidence
Silicon Valley Bank (SVB) collapsed on Friday after failing to secure a capital increase and was subsequently placed under the control of US regulators. Little known to the general public, SVB specialized in financing startups and became the 16th largest bank in the United States in terms of assets. At the end of 2022, it had US$209 billion (€195 billion) in assets and around US$175.4 billion in deposits.
Over the weekend, US financial authorities also shut down another financial institution, New York-based Signature Bank, after customers began withdrawing their funds from the bank in droves.
In a joint statement on Sunday, the US Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Treasury Department said that SVB depositors would have access to “all their money” starting Monday and that American taxpayers won’t have to foot the bill. . The Fed announced that it would make extra funding available to banks to help them meet the needs of depositors, which would include withdrawals.
Despite the reassurances, fears of contagion remain – including among investors in Germany. After significant losses on Friday, the Frankfurt stock market continues its decline at the start of the week.
“Investors are concerned that more banks may throw in the towel in the face of rising interest rates and yields,” said Christian Henke of IG Markets.
‘Who else is out there?’
Moritz Schularick, professor of economics at the University of Bonn, believes that “decisive action” by regulators has reduced the risk of further bank failures. “The US Treasury and Federal Reserve adopted something over the weekend that should reassure depositors at those two banks,” Schularick told DW.
At the same time, however, he said the world should be alert to the wide-ranging problems facing the global financial sector: “These things are inherently difficult to predict, and the truth is that the problems that brought down Silicon Valley Bank and Signature Bank are not limited to these two banks.
Source: DW
Lori Barajas is an accomplished journalist, known for her insightful and thought-provoking writing on economy. She currently works as a writer at 247 news reel. With a passion for understanding the economy, Lori’s writing delves deep into the financial issues that matter most, providing readers with a unique perspective on current events.