Panic after the biggest bank failure in the United States since 2008?
The markets were disturbed by the Friday closure of a major Californian bank following the decision of the American authorities.
Silicon Valley Bank, a Californian bank, could no longer cope with massive withdrawals from its customers, mainly tech players.
AFP/NOAH BERGER
The closure of Silicon Valley Bank (SVB), the biggest bank failure in the United States since the 2008 financial crisis, caused a slight wind of panic to blow through the markets.
SVB, a California bank, was closed on Friday by US authorities, and the US Deposit Insurance Agency, the FDIC, took control of the establishment, which is expected to reopen on Monday under a new name.
The bank was no longer able to cope with the massive withdrawals of its customers, mainly tech players, and its last attempts to raise fresh money were unsuccessful.
The USDC cryptocurrency, said to be “stable” because it is theoretically pegged to the dollar, was heckled overnight from Friday to Saturday after its creator, Circle, announced that it had left $ 3.3 billion in the coffers of the bankrupt bank. SVB. Circle has announced that it has not been able to withdraw all of its deposits with this bank.
Circle revealed, on its Twitter account, that $3.3 billion of its assets were still in SVB’s coffers, inaccessible as it was. FIDC only guarantees deposits up to $250,000 per customer per bank.
US Treasury Secretary Janet Yellen called several financial sector regulators on Friday to discuss the situation, reminding them that she had “full confidence” in their ability to take appropriate action and believed that the banking sector remained “ resilient”.
Nervous customers
Little known to the general public, SVB had specialized in the financing of start-ups and had become the 16th American bank by the size of assets: at the end of 2022, it had 209 billion dollars in assets and around 175.4 billion in deposits.
His disappearance not only represents the biggest bank failure since that of Washington Mutual in 2008, but also the second biggest failure of a retail bank in the United States.
Outside the bank’s headquarters in Santa Clara on Friday, a few nervous customers wondered how they could access their funds, some trying to guess what was going on through the closed, glass doors.
On the storefront, a paper from the FDIC indicated that they could, starting Monday, withdraw up to $250,000.
“It’s not good. A lot of the biggest (venture capitalists) have very high deposits here,” remarked a client who declined to be named. Boss of a start-up, he used the bank to pay his employees and is worried about them.
In the markets, the panic movement began on Thursday, after SVB announced that it was seeking to quickly raise capital to cope with the massive withdrawals of its customers, without succeeding, and having sold 21 billion dollars worth of securities. financiers, losing $1.8 billion in the process.
The announcement surprised investors and revived fears about the soundness of the banking sector as a whole, particularly with the rapid rise in interest rates which is lowering the value of the bonds in their portfolios and raising the cost of credit.
The four largest US banks lost $52 billion on the stock market on Thursday and in their wake, Asian and then European banks faltered.
In Paris, Societe Generale lost 4.49%, BNP Paribas 3.82% and Crédit Agricole 2.48%. Elsewhere in Europe, the German bank Deutsche Bank dropped 7.35%, the British Barclays 4.09% and the Swiss UBS 4.53%.
On Wall Street, the big banks rallied on Friday after the rout the day before: JPMorgan Chase gained 2.54% while Bank of America and Citigroup lost less than 1%.
Medium-sized banks or more concentrated on one type of customer were on the other hand more in turmoil, First Republic for example dropping nearly 15% and Signature Bank, close to the cryptocurrency community, 23%.
Guardrails
“As is often the case in finance, the problem did not come from where it was expected,” explains Alexander Yokum, from CFRA. “A lot of observers were wondering about the debt piling up on credit cards or the office real estate market. We did not expect a “bank run”, a chain reaction that begins with massive withdrawals of customers, he told AFP.
Stephen Innes, an analyst at SPI Asset Management, wants to be reassuring, estimating “low”, in a note, the risk “of a capital or liquidity incident among the big banks”.
Since the financial crisis of 2008/2009 and the bankruptcy of the American bank Lehman Brothers, banks have had to give reinforced guarantees of solidity to their national and European regulators.
For example, they must demonstrate a higher minimum level of capital intended to absorb any losses.
For Morgan Stanley analysts, “the funding pressures facing SVB are very unique” and other banks are not facing a “cash shortage”.
AFP
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