After the collapse of the American Silicon Valley Bank, the financial markets are worried about further bank failures. In the United States, but also in Great Britain, the case caused crisis meetings over the weekend. Monetary watchdogs and financial supervisors want to prevent further companies from being affected.
Silicon Valley Bank, which specializes in financing technology companies in California, is already putting pressure on numerous start-ups that are now struggling to continue paying their employees. The US Federal Reserve announced that its main decision-making body will meet for a special meeting on Monday.
With significant interest rate hikes, central banks around the globe have tried to curb inflation, which has skyrocketed at least since the Russian attack on Ukraine a year ago. After more than a decade of very low interest rates or even zero interest rates, cracks are now emerging in the financial system.
Some investors fear that the noticeable change of course will take its revenge. In America, for example, the Fed has raised interest rates at its highest rate since the early 1980s. Side effects of this are the fall in share prices, especially of technology stocks, the turbulence in the field of crypto assets and pressure on American and British real estate funds.
Search for a buyer
The collapse of Santa Clara-based Silicon Valley Bank (SVB) is the biggest collapse since the global financial crisis of 2008. The institution had $2022 billion in assets on its balance sheet at the end of 209, making it the No. 16 in the American banking industry. So far, investors in particular have been suffering from bankruptcy, taking particularly risky bets. But this could change, experts fear.
Well-known investors such as Kyle Bass and Bill Ackman are therefore calling on the government in Washington to intervene quickly to prevent customers from wanting to withdraw their bank deposits en masse. At SVB, customers had withdrawn 42 billion dollars in just one day. The California regulator then pulled the plug on Friday and closed the institute.
Due to the size of the SVB, the circle of possible rescuers is limited. According to a report by the Bloomberg agency, the Fed and the FDIC are discussing a backstop solution for institutions that could now also come under pressure. This could be an attempt to reassure bank customers in order to avoid panic. The Fed and FDIC declined to comment. The White House announced on Saturday that President Joe Biden had spoken with California Governor Gavin Newsom about the bank.
Crisis meeting also in London
The Fed announced a meeting of its Board of Governors for Monday. It will be primarily about advance and discount rates, said the central bank on Sunday. The Fed's lending through the so-called discount window plays an important role in supporting the liquidity and stability of the banking system.