11 mar 2023 11:18 am
A serious banking crisis seems to be developing in the USA. With the Silicon Valley Bank, a large financial institution had to shut down its business operations for the first time since the financial crisis of 2008. The deposits were placed under administrative receivership.
Silicon Valley Bank (SVB), one of California’s largest banks, went out of business on Friday, making it the largest bank to collapse in the US since the 2008 financial crisis, according to the Federal Deposit Insurance Corporation (FDIC). The latter is an agency that insures small customer deposits according to local laws and manages them in the event of a crisis. In the FDIC Urgent Notice from Friday (local time) it says:
“Silicon Valley Bank in Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver.”
The FDIC transferred all of the SVB’s insured deposits to a separate entity, the Deposit Insurance National Bank of Santa Clara. At least the smaller bank balances seem safe. The authority assured:
“All insured depositors will have full access to their insured deposits again by Monday morning at the latest.”
As of Saturday morning (CET), no updated information was available on the SVB website itself.
The SVB had specialized in working with start-ups in Silicon Valley. On March 8, the bank announced that it had sold virtually all of its existing securities, posting an after-tax loss of $1.8 billion. An attempt to raise $2 billion in capital the next day failed. SVB shares fell more than 60 percent, and trading in these securities was halted on March 10. As a result, the US banking sector lost 6.5 percent on March 9 and 3.5 percent on March 10. The SVB then commissioned consultants to examine the possibility of a sale.
The last financial crisis hit the United States in 2008. The trigger was the collapse of the mortgage lending market, which began back in 2006, and the collapse of the fifth-largest US investment bank, Bear Steams, as well as two major financial institutions, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Corporation (Freddie Mac).
As a result, Lehman Brothers, one of the systemic banks in the United States, filed for bankruptcy in September 2008. The company was more than 150 years old at the time, and its assets were worth $639 billion. This bankruptcy was the largest in American history and triggered the collapse of financial institutions not only in the US but also in Europe.
more on the subject – Heavy losses – fear of banking crisis
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