The bankruptcy of the US bank of Silicon Valley last week caused panic among investors. “Investors see this as the start of the avalanche,” says Nico Inberg of news platform De Aandeelhouder. The US Silicon Valley bank, which mainly serves technology companies, ran into difficulties last week and was shut down by authorities on Friday. Federal Public Service FDIC is now the administrator.
The bank had to contend with a real bank run on Thursday. This follows the announcement that the SVB wanted to raise $2.25 billion in capital to shore up its finances. On Thursday alone, private clients and asset managers attempted to recover $42 billion. SVB did not have that money. Not since the 2008 financial crisis has a US bank failed so badly. Troubles translated to banks and stock exchanges around the world on Friday.
For example, prices fell sharply on Wall Street last week. The eighteen banks in the S&P 500 banking index lost a total of $80 billion in market value on Thursday. Big banks like JPMorgan and Wells Fargo, for example, had to drop 5.4 and 6%, respectively.
SVB’s rapid sinking also led to severe jitters among investors in other midsize US banks such as PacWest (down 38 percent), Signature Bank (down 23 percent), Western Alliance (down 21 percent), and First Republic Bank (down 21 percent). minus 15 percent) percent).
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Although the big banks are not directly experiencing the problems of bankruptcy, the fear of contagion is great. ‘You see a shock reaction on the stock market. This is because all banks are indirectly related to each other. For example, banks lend money to each other. Furthermore, they fear a snowball effect.’
“When someone says there’s no need to panic, it’s often time to run.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
