Two major banks closed in the US in a few days: Silicon Valley Bank and Signature Bank
This collapse is already called the largest since the global crisis of 2008.
On March 10, California’s financial regulator announced the bankruptcy of Silicon Valley Bank. It was one of the top banks in Silicon Valley and sixteenth in the US. SVB’s assets were valued at $209 billion, and among its clients were high-tech startups and venture capital funds (they invest in innovative projects).
This is the second largest bankruptcy in US history and the largest since the 2008 crisis. The collapse of SVB began with the fact that the bank, having received money from startups, invested in mortgage and treasury bonds. However, he did not take into account the surge in inflation amid the pandemic – because of him, the US Federal Reserve raised interest rates. As a result, the value of the bonds purchased by SVB fell by $15 billion, and the bank itself reported losses and caused panic among customers who began to massively withdraw money from their accounts. Soon, SVB shares collapsed by 60%.
A couple of days later, regulators also closed the New York-based Signature Bank with $110 billion in assets. This was explained by the need to maintain the stability of the financial system and systemic risks associated with the bankruptcy of SVB. According to The New York Times, because of the panic, Signature’s clients also began withdrawing deposits, and the bank’s shares collapsed. Then the regulators announced the closure – and for the management of Signature it came as a complete surprise.
Another four largest US banks lost $ 52 billion in one day. In response, the US authorities said that depositors would have access to their money in SVB and Signature, and urgent financing would be provided to organizations affected by the collapse of the California bank.
But a 2008-level crisis is unlikely. Experts warn that the closure of SVB and Signature could hit several more banks. However, in general, the financial system is stable: after the Great Recession, large banks became stricter about capital and tried not to keep it in one industry — and now the market has begun to recover.