The rapid unravelling of SVB Financial Group has blindsided the US banking industry after years of stability.
Its collapse on Friday – the largest bank failure since the 2008 financial crisis – had a unique set of circumstances but raised questions about hidden weaknesses that could have consequences for its customers and employees, and potentially highlight issues in other US banks.
“These banks that have large amounts of institutional uninsured money … that’s going to be hot money that runs if there’s a sign of trouble,” Bair said.A sequence of events led to SVB’s failure including it selling US Treasury bonds to lock in funding costs due to expectations of higher interest rates, resulting in a loss of US$1.8 billion .
“Banks are opaque, so immediately, we all go ‘wait a minute, how interconnected is this bank to another one?’” said Mayra Rodríguez Valladares, a financial risk consultant who trains bankers and regulators. “Investors and depositors do not want to be the last ones turning out the lights in the room, so they have to leave.”Several experts said any ripple effects in the rest of the banking sector may be limited.
The banking sector steered through the COVID-19 pandemic, thanks in part to tougher rules put in place following the global financial crisis in 2008. However, during president Donald Trump’s administration, some rules were eased. Those easier rules for regional banks are likely to come under scrutiny as watchdogs look to ensure they too have enough cushion to weather similar stresses, some regulatory and industry sources said.
Malaysia Latest News, Malaysia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
The SVB collapse has serious implications for both banks and techOPINION: US regional banks and Silicon Valley tech firms are nervously contemplating the likely cost of the Silicon Valley Bank collapse.
Read more »
Silicon Valley Bank collapse: Unpredictable contagion and big risk lessonsFears of a broader financial sector collapse appear to be unfounded for the time being, but that doesn’t mean the downfall of the Silicon Valley lender won’t have serious repercussions.
Read more »
USD Coin value falls after revealing $3.3bn held at Silicon Valley BankThe stablecoin fell as low as $0.87 as Circle broke the news that its reserves were at the collapsed lender
Read more »
Yellen says Silicon Valley Bank won’t receive bailout after collapseUS treasury secretary says Biden administration is working closely with regulators to help depositors as fears of banking crisis rise
Read more »
US Treasury Secretary says ‘no bailout’ for Silicon Valley Bank following collapseUS Treasury Secretary Janet Yellen has spoken to Face The Nation and says there’ll be “no bailout” of Silicon Valley Bank after its collapse, according to CommSec’s Craig James. “They’re focused on protecting the depositors and insured deposits of up to $250,000 likely to be paid later today,” he told Sky News Australia. “It is a big week, and we’ll be watching the news flow coming out from the Federal Reserve, the regulators … and also the Treasury Secretary again, Janet Yellen.” Presented by CommSec.
Read more »
US Treasury Secretary says government won't bail out Silicon Valley BankUnited States Treasury secretary Janet Yellen says the federal government will not bail out the Silicon Valley Bank, but it is working to help depositors concerned about their money.
Read more »