SVB pulled the markets with it – Finance – Kommersant

The collapse of US bank Silicon Valley Bank – the biggest bank failure since 2008 – led to a drop in stock prices in Europe and the closure of another bank in the US. In the meantime, the US authorities decided to guarantee deposits in SVB, which caused a lively discussion among experts about the benefits or harms of such a move.

sudden bankruptcy of the Californian Silicon Valley Bank (SVB), which happened on Friday, continues to negatively affect the US and global economy. Sunday New York Regulator closed due to systemic risks, another bank is Signature Bank, which specialized in lending to the cryptocurrency industry. The US authorities on Monday announced an auction for the purchase of SVB. HSBC already I bought British branch of the bank for £1.

On Monday, European and Asian stocks fell, dragging stock indices with them. The pan-European Stoxx 600 fell 2.5%, while European bank stocks fell 6% on average, Commerzbank shed 12%, Credit Suisse shed 9.4% and HSBC shed 3.5%.

Yesterday US Treasury Secretary Janet Yellen statedthat the state will not save the bankrupt bank SVB, but is going to help its depositors.

According to her, the tactics of the American authorities have changed since the financial crisis of 2008, when they sought to rescue financial institutions.

Today US President Joe Biden also declaredthat the authorities guarantee the access of bank depositors to their deposits, but the bank’s management will be held accountable, and the rules for credit institutions will be tightened. These statements contributed to the growth of US indices. On Monday, after the opening of trading, the Dow Jones rose by 0.8%, S&P – by almost 1%, NASDAQ – by 1.5%. However, shares of the American bank First Republic, which specializes in mortgage lending, fell by 70%.

Some officials in Europe also found it necessary to reassure fellow citizens and clients. French Economy Minister Bruno Le Mer said that the collapse of the SVB does not threaten the French banking system. The Swedish financial regulator said on Monday that this situation does not threaten the stability of the country’s financial system. And a small Indian bank, SVC, issued a statement that its customers have nothing to worry about (and such concern arose due to the similarity of the name to the bankrupt SVB).

SVB, established in 1983, was one of the largest US banks specialized in working with technology start-ups and their investors. As of the end of 2022, SVB’s total assets were estimated at $212 billion, it was the 16th largest bank in the United States, and the volume of deposits was about $175 billion.

Last Wednesday, SVB issued $1.75 billion of shares “to strengthen its balance sheet,” warning investors to recoup $1.8 billion in losses. Investors suspected the bank’s problems were much deeper and began selling its shares. On Friday, California regulators declared the bank bankrupt and placed it under external management.

The fact that the vast majority of SVB’s clients are companies and wealthy individuals with large deposits can create problems, since in the United States federal deposit insurance covers deposits up to $250,000.

The opinions of experts about the actions of the American authorities were divided. Some investors urged the government to act more actively in this situation.

Influential billionaire investor Bill Ackman has said the government must act quickly or there will be a run on banks like the 1930s.

At the same time, not all experts took the deposit guarantee for SVB depositors as the right step – according to some of them, if the state guarantees any deposits, both banks and their clients will not have an incentive to independently provide for financial risks.

“This rescue is an important change in how the American system is built and what incentives it has. The costs will be passed on to everyone who uses banking services,” says a senior researcher. “If all bank deposits are now insured, why do you need banks?”

According to Rabobank strategists Michael Avery and Ben Pickton, the bailout is effectively “financial easing” and “increasing moral hazard.” John Thornhill, founder of European startup publication Sifted, in his column in Financial Times has already joked that “the SVB situation has shown that there are few libertarians in the financial trenches” and noted that “like the banking titans in 2008, the tech tycoons want to privatize profits and pass on losses to society.”

At the same time, many experts note that the decision of the US authorities has made the situation less acute. “It certainly takes the pressure off in the short term, and later we can worry about moral hazard and weak regulation,” said Steve Sosnick, senior strategist at Interactive Brokers. Shareholders and bondholders of SVB are likely to lose their money, he said, and concerns remain that the same could happen to other banks.

Yana Rozhdestvenskaya