In the United States, the federal authorities terminate the activities of the Signature Bank, but affirm however that the depositors of the Signature Bank and the Silicon Valley Bank will be compensated. A declaration supposed to reassure frightened investors at the idea that the banking system is swept away by a systemic crisis.
“The Federal Reserve is ready to deal with any liquidity pressure that may arise,” the body said. And according to this statement, the US taxpayer will bear no loss as a result of this decision.
The closure of Signature Bank is the third bank failure in the United States in just one week.
The three bankrupt banks are intimately linked to the technology sector
Silvergate Bank announced its liquidation last Wednesday, pledging to reimburse its depositors in full. This bank had set up an exchange network, named Silvergate Exchange Network (SEN), which led to its downfall. The SEN indeed played a crucial role for companies in the cryptocurrency sector. It was used as a 24/7 payment service. Signature Bank operated a similar service, called Signet.
But the bankruptcies of Silvergate (founded in 1988) and Signature Bank, if they are of the same nature, do not have the same consequences. Signature Bank assets are around $110 billion, compared to $11 billion for Silvergate.
And in the meantime, the SVB (Silicon Valley Bank), a quarantine bank, disappeared in barely two days. SVB’s collapse began last Wednesday, when the bank told investors it had sold $21 billion worth of securities while suffering a loss of $1.8 billion. A maneuver intended to raise additional capital to cope with the drop in deposits.
No “risk of contagion” in France
More generally, the collapse of SVB is the result of the rise in interest rates operated for a year by the American central bank, in order to fight against inflation. Rising interest rates benefit banks by improving their income from interest on loans. But at the same time, rising rates mechanically lower the value of bonds held by banks. This caused the fall of SVB, a major bank which until then had financed the young shoots of Silicon Valley.
Still, others point to technical failures of the bank to explain, at least partially, his fall.
In France, Bruno Le Maire indicated that he did not see any “risk of contagion” in this cascade of bankruptcies. “The French banking system is solid,” he insisted.
Since the financial crisis of 2008/2009 and the bankruptcy of the American bank Lehman Brothers, banks have had to give significant guarantees of solidity to their national and European regulators. For example, they must demonstrate a higher minimum level of capital intended to absorb any losses. The fall of SVB is the second largest bank failure in US history and the largest since the financial crisis 15 years ago.