“It is a good thing that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution by tomorrow morning.” This is what one of the greatest industrialists of the 20th century and founder of the Ford automobile company, Henry Ford, says.
Now this quote is relevant again after one of the largest banks in the US – “Silicon Valley Bank” – SVB (Silicon Valley Bank – SVB) was placed under the control of receivers in California late on Friday evening, and the Federal Office The U.S. Deposit Insurance Corporation (FDIC) has announced that it will give depositors guaranteed deposits of up to $250,000.
This is the second largest failure of a financial institution in the United States and the first of similar dimensions since the financial crisis known as the “Great Recession”, which began in 2008, following the bankruptcy of Lehman Brothers on September 15 of the same year. writes BTA in its analysis.
All this is happening against the background of publications in specialized publications in the US, which indicate that in recent days the bank has been subjected to intensive withdrawal of deposits from start-up companies after information emerged about its financial condition, and in a short time they were transferred in other banks. Much of the communication that something was wrong with SVB was spread on Twitter, as well as in closed groups on other applications.
An interesting question is whether the bank simply could not wait for its debt instruments to mature, but therein lies the real problem – it could have done so had it not been forced to sell due to a lack of liquidity, which was clearly present or was imminent.
Although mainly engaged in the specific activity of supporting start-up companies, SVB is the 16th largest in the US by assets and is a credit institution like the big players from Wall Street, the City of London and Western European capitals.
After the news that SVB is seeking $2.25 billion in fresh capital in the form of shares and convertible bonds, shares of a number of leading banks fell.
Germany’s Deutsche Bank suffered a nearly 8 percent plunge immediately after SVB announced it was seeking capital by selling new shares and other instruments, while Britain’s HSBC fell by around 4.5 percent, in the USA those of “JP Morgan Chase” (JP Morgan Chase) lost 5.4 percent, of “Citigroup” – over 4 percent.