Nfter the collapse of America’s Silicon Valley Bank, fears of further bank failures are raging on the financial markets. In the United States, but also in Great Britain, the case caused crisis meetings at the weekend. Currency watchdogs and financial supervisors want to prevent other companies from being affected.
The Silicon Valley Bank, which specializes in financing technology companies in California, is already putting pressure on numerous start-ups that are now having problems continuing to pay their employees. The American Federal Reserve announced that its most important decision-making body will meet for a special meeting on Monday.
Central banks around the world have tried to curb inflation, which has skyrocketed since the Russian attack on Ukraine a year ago, by raising interest rates significantly. After more than a decade of very low or even zero interest rates, cracks are now appearing in the financial system.
Some investors fear that the noticeable change in course will take revenge. In America, for example, the Fed has raised interest rates the most since the early 1980s. Side effects of this are the falling share prices, especially of technology stocks, the turbulence in the area of crypto investments and pressure on American and British real estate funds.
Search for a buyer
The bankruptcy of the Santa Clara-based Silicon Valley Bank (SVB) is the largest collapse since the global financial crisis of 2008. The institution had assets of $209 billion on its balance sheet at the end of 2022, making it number 16 in the American banking industry. So far, the bankruptcy has mainly affected investors who make particularly risky bets. But that could change, experts fear.
Well-known investors such as Kyle Bass and Bill Ackman are calling on the Washington government to intervene quickly to prevent customers from wanting to withdraw their bank deposits en masse. At SVB, customers had withdrawn $42 billion in just one day. The California regulator then pulled the plug on Friday and closed the institute.
Because of the size of the SVB, the circle of possible rescuers is limited. According to a report by the Bloomberg agency, the Fed and the FDIC are discussing a fallback solution for institutions that could now also come under pressure. An attempt could be made to reassure bank customers in order to avoid panic. The Fed and FDIC declined to comment. The White House announced on Saturday that President Joe Biden had spoken to California Governor Gavin Newsom about the bank.
Crisis meeting also in London
The Fed announced a meeting of its Board of Governors for Monday. It will primarily be about advance and discount rates, the central bank said on Sunday. Fed lending through the so-called discount window plays an important role in supporting the liquidity and stability of the banking system.