Anxiety pervades the general atmosphere of the banking system in the wake of the US financial authorities’ closure of the US “Silicon Valley” Bank, which lost more than 60 percent of its value, amid mounting pressures on it from several aspects, and perhaps future fears and negatives that will be discovered after a while.
Although this bank is not so large that its problems threaten to launch a large-scale crisis, its collapse is the largest since the financial crisis that hit the world in 2008, and practically began with the collapse of the huge Lehman Brothers Bank, which specializes mainly in providing real estate loans.
Note that this last bank has already ended as a result of huge loans in number and size granted with simple guarantees, and some of them have already been provided without any guarantees.
Some fear the return of this virus, which infects banks and leads to collapse and disappearance from the scene.
The picture is different now with Silicon Valley. This American bank reached this dangerous situation, in the wake of the decline in its liquidity level, through frequent and rapid withdrawal of deposits by depositors in recent times.
The conditions of this bank have reached an extent that is not acceptable within the scope of the financial system, after it was exposed in the past months to escalating fluctuations in returns.
The truth is that the parent company of the bank tried during the recent period to move to increase its capital by $2.25 billion, in order to bridge as many liquidity gaps as possible, but the regulatory authorities in the United States found that it was necessary to move on their part, in order to guarantee the rights of depositors and investors in it. .
The problems he was exposed to are not new, but they have exacerbated in recent times, largely affected by the high levels of interest, which added more pressure to the operations of the bank and its parent company. So far, Silicon Valley Bank has not been declared bankrupt, but this possibility is possible, at least in the coming short period.
The Silicon Valley Bank focuses mainly on technology, but it has not withstood much pressure in terms of high interest rates, which will continue to rise in the United States this year, according to what US lawmakers announced on more than one occasion. But in the end, the bank’s exposure is not great when compared to the exposures of many banks during the 2008 crisis.
And the most important axis of the problem that he is going through remains related to short-term interest rates, which are now higher than long-term rates, due to the deliberate financial policies at the present time in the American arena.
Concern exists within the global banking system as a result of the faltering “Silicon Valley”, and it may rise to a frightening situation, but the problem is deeper in view of the problems that the American “Silvergate” bank is exposed to at the present time as well.
The challenges facing Silvergate lie in the fact that it has been exposed to the digital currency market, which has been facing great difficulties for several months, and for this reason, the parent company of the bank will work to liquidate it in the coming period.
The turmoil in the banking system on the American scene as a result of the failure of two banks, although they are smaller in size than hundreds of other traditional and investment banks, came at a very critical time, because the current financial policies resulting from the situation in the face of the inflationary wave through a successive increase in interest, have already confused the public scene, in When there are no other alternatives for US legislators but to resort to interest in this confrontation, which may last until the middle of the current decade.
And because the situation is sensitive, any vibration of any bank, regardless of its size, turns anxiety into panic, and this is what happened with the two American banks during the past days, after their value declined in a very frightening way.