SVB has raised billions of dollars in deposits thanks to tech companies’ strong performance during the pandemic. He spent most of that money on long-term government bonds. But with the post-pandemic crisis and rising interest rates making money more expensive, his clients increased their spending and reduced deposit rates.
Recent bank failures Silicon Valley Bank (SVB) A California bank, the 16th-largest US bank by capitalization, has sparked financial turmoil in the country, baffling dozens of small businesses. And not so much for the actions of financial giants.
Voices calling for calm and a That drop is more due to poor capital management than system weakness.
But its impact is still being felt on Wall Street, especially among small businesses.
“Americans can be sure that The banking system is secure. (…) In my administration nothing is above the law. ” today the President of the United States Joe Biden reassures Americans that the country’s banking system “safety”.
At the moment there is only one bank of New Yorkers. signature bank seeing how the earth opened under the foundations of its branches, the authorities followed the example of the SVB and decided to close the entity and intervene on Sunday.
Cause of a problem
SVB has raised billions of dollars in deposits between 2020 and 2022 thanks to the tech companies’ strong performance during the pandemic. Most of the money was used to buy government bonds long term. The post-pandemic crisis and interest rate hikes by the Federal Reserve have made money more expensive. The customer increased spending and slowed down the pace of deposits.
To meet the liquidity needs of the companies we serve, SVB sells immature bonds for $21 billion which resulted in a loss of $1.8 billion, which it sought to cover with a capital increase.
However, after announcing this strategy, The stock plummeted by 60% On Thursday, capital raising faltered, Many customers withdrew funds deepened its title slump on Friday, leading authorities to intervene with the entity to prevent the situation from escalating.
global banking contagion
now Many investors fear that other banks, especially those exposed to the same type of customers, will experience sudden outflows of deposits they cannot handle. they started selling shares.
Falling 78%, First Republic (-51.42%) is one of the regional banks most affected by the seismic waves caused by the SVB intervention. Others such as Western Alliance (-49%), PacWest (-47%), Comercia (-26%), Zions (-18%) and Charles Schwab (-8.69%) Keep your composure even if your title crumbles.
Frist Republic yesterday tried to calm fickle market sentiment with a statement claiming it had further improved and diversified its financial position through access to additional liquidity from the Federal Reserve and JPMorgan Chase. failed.
“Total liquidity available and not used to fund the business is currently Over $70 billion” the San Francisco, Calif.-based bank said yesterday.
An hour after the stock market closed, the KBW sub-index of banks within the Nasdaq fell 9.29%, while the financial sector fell 2.57%. The sale of shares has made me bleed less.
Thus, among the nation’s largest companies, JPMorgan Chase lost 1.20%, Bank of America 3.8%, Citigroup 6.43%, Wells Fargo 5.42% and US Bancorp 7.21%.
This atmosphere of concern extended to the other side of the Atlantic. Germany’s Commerzbank (-12.71%), Switzerland’s Credit Suisse (-9.58%) and Italy’s UniCredit (-7.84%) saw the biggest declines.
Spain’s BBVA and Banco Santander fell 8.24% and 7.35% respectively. In the UK, the Barclays title left him 6.31% of its value and his HSBC title, which today announced the acquisition of SVB’s UK subsidiary, was 4.13% of his.
Source: Biobiochile
