Fears of a “new wave of bankruptcies” in the banking sector – Last Minute Economy News

The bank’s bankruptcy news, which came at a time when rate hikes continued despite high inflation and recession expectations were mounting, added further concerns to global markets.

Some banks had to realize the losses on their bond holdings after pricing the US Federal Reserve (Fed) to raise key rates to a point above expectations.


California-based SVB, one of these banks, announced it will raise more than $2 billion in capital on March 8, after closing its $21 billion bond position at a loss of about $1.8 billion.

The share price of SVB has plummeted by more than 60 percent in the past week, after the market learned that the bank was running out of liquidity.


Operations were suspended as the bank continued to lose money after some venture capital investors advised companies to withdraw their money from the bank.

The rapid collapse of the SVB forced banking regulators to act, and the US Federal Deposit Insurance Corporation (FDIC) announced on March 10 that it had appointed a trustee for the SVB, sending markets crashing.

Industry experts were also stunned by the FDIC’s decision to appoint a trustee for the bank, typically announcing it after the stock market close to limit potential loss of customers in the middle of the day.

The panic created by venture capital in overcoming the liquidity crisis dragged the 16th largest US bank into one of the largest bankruptcies in the country’s history within 48 hours.


The largest bankruptcy was experienced by Washington Mutual during the crisis of 2008. In late 2007, Washington Mutual, which had 43,000 employees, 2,200 branches and $188.3 billion in deposits, went bankrupt when the housing crisis broke out in the United States. The bank’s operations were sold to JPMorgan Chase as Washington Mutual clients withdraw $16.7 billion in 10 days. Customers with uninsured deposits from the bank did not lose their money.

It has been argued that the bankruptcy of SVB, whose deposits are not largely insured by the FDIC, may cause its customers more pain than the bankruptcy of Washington Mutual.


Founded in 1983 and specializing in technology industry banking, SVB often provided financing to startups and venture capital.

The bankruptcy of SVB, which includes companies such as Shopify, ZipRecruiter and venture capital firm Andreessen Horowitz, caused a shock wave in the technology world.

The FDIC established the Santa Clara National Bank of Deposit Insurance (DINB) to protect the SVB’s insured depositors and reported that all SVB’s insured deposits were transferred there. The FDIC’s statement said customers can access their insured deposits no later than Monday morning.

News in the US press noted that more than 93 percent of the $161 billion invested in the SVB was not insured by the FDIC.

The FDIC reported that future dividend payments could be made to uninsured depositors if the bank’s assets are sold.

Experts say the bank’s bankruptcy could have far-reaching consequences for the tech world and worry banks.


The Fed’s aggressive rate hikes in the face of high inflation hit both the SVB and the technology sector hard.

The high level of debt of many companies in the technology sector, especially startups, makes these companies and their ecosystems vulnerable to interest rate hikes.

As companies faced higher borrowing costs, venture capital and other riskier types of investments also became less profitable.

The decline in cryptocurrencies also negatively impacted many technology companies. Many companies, including Facebook, Instagram and WhatsApp owner Meta, Google’s parent company Alphabet and tech giants like Amazon, had to go bankrupt.

As high interest rates made it more expensive for many startups to raise money, some SVB clients began withdrawing their funds to meet their liquidity needs. This prompted the SVB to look for ways to meet the withdrawals and sell bonds. However, the SVB closed its bond position with a loss, as the continued interest rate hikes also negatively affected bonds.

Experts state that the total loss of banks due to the losses in the bond market exceeds $ 600 billion, but it will not only cause a crisis in the banking sector as in 2008.

Noting that SVB lacks good risk management and a well-rounded client portfolio, experts say they are looking for buyers for the bank.

In the news, citing anonymous sources on the subject, it was reported that the FDIC had begun the auction process for the SVB late on Saturday.


The bankruptcy of the SVB last week, including the country’s largest banks such as Goldman Sachs and Bank of America bank shares negative influence.

While the bank’s failure went down in history as “the second largest bank failure in the United States,” there are fears it will spread industry-wide.

On Friday, US Treasury Secretary Janet Yellen met with officials from financial system regulators to discuss developments surrounding the SVB.

Yellen stated in an interview with CBS television on Sunday that she is not in favor of the rescue package for the SVB. Yellen stressed that the situation is very different from the financial crisis of almost 15 years ago, which led to bank bailouts to protect the sector. provide for their needs.” used the sentences.


Bankruptcy news came from New York-based banking sector Signature Bank, which had a busy weekend following the bankruptcy of SVB in the US.

The New York Department of Financial Services (DFS) reported last night that the FDIC has appointed a trustee for Signature Bank to protect depositors.

With these developments, the US Treasury Department, the Fed and the FDIC issued a joint statement on the SVB and Signature Bank and announced the decisions taken on deposit protection.

The statement, which stated that starting today, SVB clients will have access to all their funds, stated that no loss related to SVB and Signature Bank will be borne by the taxpayer.

The Fed also announced that additional funding would be provided to eligible depositories to help banks meet the needs of all depositors.

Noting that the Bank Term Financing Program (BTFP) will be established for additional funding that will provide loans to depository institutions for up to one year, the Fed stated that the US Treasury Department will provide up to $25 billion from the Exchange Stabilization Fund to the program.


The rapid collapse of the SVB in the US has raised concerns in other countries as well.

Israeli Prime Minister Benjamin Netanyahuannounced that they will help Israeli companies in this sector against the crisis created by the bankruptcy of the SVB in the high-tech world.

In his post on Twitter, Netanyahu stated that he was closely following the bankruptcy of SVB, which caused a deep crisis in the high-tech world, and held talks with officials from the high-tech sector in Israel.

Netanyahu pointed out that they will take measures to prevent the high-tech sector in Israel from being adversely affected by this crisis, noting that if necessary, beyond the responsibility of high-tech companies and their employees in Israel, Israeli companies whose operations in Israel will take steps to help them overcome the liquidity crisis caused by this turmoil.

British Prime Minister Rishi Sunak He also stated that the UK government is trying to find a solution to mitigate the potential impact on businesses of the bankruptcy of SVB and its UK subsidiary.

On the other hand, The International Monetary Fund (IMF) He indicated that they are closely following developments surrounding the SVB and their possible effects on financial stability. The IMF said in a statement that it is confident that US policymakers are taking appropriate action to address the situation.

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