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The Big Four US Banks Lose $47 Billion in One Day – Because of the Collapse of Silicon Valley Bank!
The four largest US banks lose $47 billion in one day – because of the collapse of Silicon Valley Bank
After the derivatives bubble, which still plagues humanity, came the startup bubble, which burst earlier than expected. In both cases, some took out billions on the backs of citizens, investors and national economies.
Turbulence will certainly occur, but is expected to be less than that of 2008.
Silicon Valley Bank plunged 60% on Wall Street yesterday as it liquidated its portfolio in an effort to raise capital, selling positions worth a total of $21 billion for a loss of $1.8 billion. It also raised $500 million from venture capital firm General Atlantic.
Silicon Valley Bank's problems are unprecedented — given that it serves tech startups, for which funding has dried up in recent months.
Silicon Valley has been heavily reliant on the technology industry, and there is little chance that it will affect the general banking sector and create a similar mess to the one that led to the recession about a decade ago. The biggest banks—the ones most likely to cause a systemic issue— have healthy balance sheets and plenty of capital .
But those problems have fueled broader fears that recent rate hikes have weighed on the value of bonds and other banks, which tend to fall when interest rates rise.
The fall of Silicon Valley Bank came with incredible speed, with some industry analysts on Friday arguing that it was a good company and probably a wise investment. Silicon Valley Bank executives were scrambling to raise capital early Friday and find additional investors. However, trading in the bank's shares was halted before the opening bell due to extreme volatility.
How much it affects other banks
The concern is that smaller banks in particular are suffering from similar problems to Silicon Valley Bank. Bonds in their portfolios have lost significant value in the face of a sharp interest rate hike by the US Federal Reserve (Fed). Independent analyst Christopher Whalen therefore surmises that a number of smaller institutions should also seek capital increases.
In Greece, Piraeus Bank fell by 4.09%, National Bank by 3.81%, Alpha by 3.44% and Eurobank recorded losses of 2.66%.
Who benefits?
As Handelsblatt explains, some banks said on Friday that they received large amounts of deposits. "We gained hundreds of new customers last week," San Francisco-based Mercury Bank wrote to clients on Friday, assuring them it was "profitable and well capitalized."
According to reports, America's largest bank, JP Morgan Chase, also acquired a large number of former SVB clients. The bank's shares were among the few gainers on Friday, gaining 2.5%. Californian fintech Brex is also reportedly among the beneficiaries. It is specifically aimed at startup customers.
The situation in the markets still looked strong until a few days ago. And this despite the fact that central banks are raising interest rates at a breathtaking pace. At the same time, they are draining liquidity from the financial system by no longer fully replacing maturing bonds in their portfolio. All this is justified by persistently high inflation.
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