The collapses of Silicon Valley Bank and Signature Bank in the U.S. have sent shockwaves throughout the global banking industry. The events have caused significant volatility in the stock market, with investors worried about the stability of banks in the wake of high-interest rates.
Silicon Valley Bank, which specializes in providing services to start-ups and venture capitalists, collapsed last week. Just two days later, Signature Bank also experienced a collapse, causing alarm bells to ring for investors worldwide.
The bank collapses have had a knock-on effect on global bank stocks, causing them to fluctuate wildly. Many investors are concerned about the potential impact of high-interest rates on banks, which could lead to more collapses in the future.
Gary Ng, senior economist at Natixis Corporate and Investment Bank, believes that investors may be worried about Silicon Valley Bank and Credit Suisse for different reasons. However, both have suffered from the side effect of high-interest rates.
The collapses have highlighted the importance of strong liquidity and capital bases for banks. Credit Suisse, for example, has announced that it is taking pre-emptive measures to strengthen its liquidity. The Swiss lender intends to exercise its option to borrow up to CHF 50 billion from the Swiss National Bank under a Covered Loan Facility and a short-term liquidity facility. Both facilities are fully collateralized by high-quality assets.
In an interview earlier this week, Credit Suisse CEO Ulrich Koerner emphasized the strength of the bank’s capital and liquidity bases. This move is expected to reassure investors and restore confidence in the bank.
The bank collapses have also raised concerns about the wider impact on the global financial system. There are fears that a wave of bank collapses could trigger a wider financial crisis, similar to what happened in 2008. However, many analysts believe that the global banking system is more resilient now than it was in 2008 and that the risk of a wider financial crisis is relatively low.
In conclusion, the recent collapses of Silicon Valley Bank and Signature Bank have sent shockwaves throughout the global banking industry, causing significant volatility in the stock market. Investors are concerned about the potential impact of high-interest rates on banks, and the importance of strong liquidity and capital bases has been emphasized. While there are concerns about the wider impact on the global financial system, many analysts believe that the risk of a wider financial crisis is relatively low.
