AFPL
The closure of the Californian Silicon Valley Bank (SVB), the largest bank failure in the United States since the 2008 financial crisis, raises fears of a contagion effect, although financial analysts want to be optimistic.
COULD THERE BE A BIG FINANCIAL CRISIS LIKE IN 2008?
“We are not in the same situation, it is much more circumscribed, with a certain type of banks and a clientele from a certain sector,” said Eric Dor, director of Economic Studies at the IESEG business school, referring to the fact that the bankruptcy affected to a regional bank that works primarily with the technology sector.
SVB continues to be “a rather special case”, points out Lionel Melka, an associate at the investment company Swann, and believes that the banking crisis is already “contained” with the measures of the US authorities to guarantee all deposits .
The Federal Reserve (Fed), the central bank of the United States, has also committed to lending to other banks that need them to meet their clients’ withdrawal requests.
“Banks are in a much stronger position than they were before the financial crisis” of 2008, judges DWS, Germany’s largest asset manager, in a note.
Yesterday, however, the financial markets experienced a day of tension due to fears of the risk of contagion in the banking sector.
WHAT ROLE DID THE FED RAISE HAVE PLAY?
The Fed’s monetary tightening helped weaken commercial banks and slow economic activity.
It also encouraged customers to invest their money in financial products that pay better than checking accounts and resulted in increasing the cost of financing the technology sector.
“As always, it is the Fed’s interest rate hike that reveals the fragilities of the system,” says Eric Dor.
WHO WILL PAY THE BILL?
After the announcement on Friday of the acquisition of SVB by the Federal Deposit Insurance Corporation (FDIC), a federal agency, there is concern about the fate of the deposits blocked by the bankruptcy of the SVB.
“The guarantees provided by the Fed are important, and they open a window to provide additional liquidity,” said Alexandre Baradez, an analyst at IG France.
“Initially, the US authorities were reluctant to step in and save the banks and then reality caught up with them and they were forced to do something, although it doesn’t necessarily mean that the taxpayer has to pay,” says Eric Dor.
However shareholders of SVB and Signature Bank, another lender that also filed for bankruptcy, “will lose everything,” a Fed official said this weekend.
