Markets in turmoil as US closes Silicon Valley Bank
SANTA CLARA (United States) – U.S. regulators on Friday shut down Silicon Valley Bank in a spectacular move that sent global banking stocks into turmoil as markets worried about possible contagion from the biggest banking meltdown since the 2008 financial crisis.
US authorities stepped in and seized the assets of SVB Bank, a major lender to US startups since the 1980s, after a rush for deposits made it impossible for the mid-tier lender to survive on its own.
The travails of SVB, which is headquartered in the shadow of the world’s biggest tech companies, have raised fears that more banks could face doom as the fallout from the high inflation and higher interest rates are putting pressure on weaker lenders.
A day after the four largest US banks lost a whopping $52 billion in market value following signs of trouble at SVB, the European banking giants were similarly stuck in the red, with Deutsche Bank at times slipping 10 percent.
On Wall Street, shares in heavyweights Bank of America, Wells Fargo and Citibank tumbled on Friday, with US Treasury Secretary Janet Yellen expressing “concern” about the situation and saying she was “monitoring” some banks.
News followed shortly thereafter that the California Department of Financial Protection and Innovation (DFPI) had shut down the SVB and hired the Washington-based Federal Deposit Insurance Corporation to take over the funds.
The crisis measure protects customers with deposits of up to $250,000 and buys crucial time to find a potential buyer for what remains of the embattled Silicon Valley lender.
CNBC reported on Friday that SVB is in talks with potential buyers after failed attempts to exit the crisis on its own.
“Today’s debate revolves around whether the SVB issues are the SVB issues or the start of a larger issue for the banking sector,” said Briefing.com’s Patrick O’Hare in a statement.
“There seems to be some tolerance in the stock market for it being more of a company-specific issue, or at least not a debilitating systemic issue.”
Prior to the shutdown, trading in SVB itself halted on Friday after the bank saw more than 60 percent of its value wiped out after it was revealed it had lost $1.8 billion in securities sales to raise funds.
Investors fear other banks could suffer similar losses as they try to raise cash amid ever-rising interest rates while central banks act aggressively to tame decades of inflation.
“We’ll have to see how this story unfolds, but something always breaks during or after a Fed tightening cycle,” analysts at Deutsche Bank said in a statement.
“Is this another small wobble on that front, or the start of something bigger? It’s hard to say, but I’d be stunned if there weren’t many more casualties in this boom and bust cycle.”
Source: Crypto News Deutsch