US banks are collapsing: will the 2008 crisis repeat?

Biden addressed the Americans about problems with the US banking system. He assured depositors that they had nothing to fear. But after that, the shares of a number of banks went into a sharp fall. . About why American banks began to “fall” and how this could affect Russia, experts told MK.

Authorities in the US have closed the second major bank – New York’s Signature Bank. This happened a couple of days after the liquidation of Silicon Valley Bank in California, a Silicon Valley bank that was one of the top 20 largest American financial institutions. Its collapse was the largest since the 2008 crisis. And at the beginning of March, Silvergate Bank, which played an important role in the cryptocurrency market, went bankrupt.

The New York state financial regulator took the decision to close Signature Bank after the lending institution faced a strong outflow of depositors’ funds on March 10. Clients began withdrawing money from it amid problems at California-based Silicon Valley Bank (SVB). And although, according to the management of the financial organization, by Sunday the situation had stabilized, the authorities still decided to liquidate the bank.

SVB was shut down by the California Department of Financial Protection and Innovation (CDFPI). He was the most recognizable lender in the tech start-up industry. The collapse of this financial organization was caused by the problems accumulated over the past two years, which the bank’s managers could not cope with.

The last straw was a sharp outflow of customers – in one day they took $42 billion from their accounts in order to shift funds into more profitable assets. SVB placed deposits in mortgage bonds and US Treasury bonds with a long maturity of $91 billion. However, due to the increase in the Fed (American regulator), they fell in price, and after their sale, the bank could not solve its problems due to a loss. SVB shares fell 66% and trading was halted. And then the authorities closed the California bank itself.

But that’s not all. In early March, Silvergate Bank, well-known in cryptocurrency circles, was liquidated. His problems are associated with the collapse of the FTX exchange: at the time of its collapse, 90% of the deposit base of this bank accounted for cryptocurrency companies.

At the same time, the matter may not be limited to the collapse of three banks. “The First Republic is also under attack, whose shares have collapsed, as well as Western Alliance,” says Arthur Meinhard, head of the analytical department for global markets at Fontvielle Investment Company. “Of the larger players, Bank of America is the hardest hit right now, as its portfolio structure is closest to that of SVB.”

In connection with the situation in the financial market, the US Treasury and the Fed worked all weekend, and on the evening of March 13, President Joe Biden spoke about this.

Russian Foreign Minister Maria Zakharova ironically pointed out that the American authorities will do what every child is capable of with paints and paper – “print even more unsecured dollars than cause even more problems in the world.”

The fact is that the current problems are really caused by excess emission and have become the result of mistakes that have been made since the pandemic period. According to TeleTrade analyst Alexei Fedorov, in the period 2020-2021, the US monetary authorities increased the money supply too much in response to the coronavirus crisis, provoking the highest inflation in 40 years in 2022.

The Fed had to quickly raise the discount rate, which led to an unexpected result for banks, when prices fell not only for risky assets (stocks, cryptocurrencies, etc.), but also for risk-free ones (government bonds). This provoked a lack of liquidity not only for companies from the crypto industry and the high-tech sector, but also for the banking sector, which traditionally places the capital raised in government bonds.

As a result, now the American authorities are trying to stop the crisis, which they themselves provoked. “The Fed has already stated that for now it will only support depositors in order to maintain confidence in the banking system, but the numbers show that it will be extremely difficult to do this if panic intensifies,” said Svetlana Zubkova, associate professor at the Department of Banking and Monetary Regulation at the Financial University.

Experts disagreed on how this situation will affect our country. “The collapse of American banks will not affect the Russian economy, the banking system and exchange rates,” says BitRiver financial analyst Vladislav Antonov. “Russia remains under sanctions, the dollar and the euro are used much less frequently in international payments.”

And there is an opinion that our country will even benefit from what is happening. Thus, according to Natalya Milchakova, a leading analyst at Freedom Finance Global, Russia can partly benefit from this situation, in the sense that the problems of US banks have already led to a weakening of the dollar against world reserve currencies. Accordingly, the dollar is also not growing against the ruble, and the expert expects that during this week it will fluctuate within the limits of 74-76 rubles.