WSJ predicts a possible repetition of the fate of SVB for almost 200 US banks

Economists after the collapse of Silicon Valley Bank (SVB) came to the conclusion that another 186 US banks are also facing bankruptcy. On Friday, March 17, the newspaper reported The Wall Street Journal.

“Silicon Valley Bank collapsed after rising rates drove down the value of its assets and anxious clients withdrew uninsured deposits. In a new study, economists said they had identified 186 banks that could be exposed to similar risks.

The authors of the article mention a study by economists posted on the Social Science Research Network in which they calculated the losses of banks during the Federal Reserve System (Fed) campaign. The sharp increase in the key rate reduced the value of SVB’s assets and provoked panic among clients. The bank failed to cope with the consequences and was forced to close. Economists say there are 186 other lenders in the US that face similar risks.

The researchers noted that in the event of withdrawals by uninsured depositors, the insured risk experiencing depreciation. With this development of the situation, the regulator will intervene.

Earlier, on March 11, it became known about the bankruptcy of Silicon Valley Bank in the USA. The organization went bankrupt in less than two days. After the bank made an unsuccessful operation with securities, depositors began to withdraw funds sharply from their accounts.

After the sale of the British branch of the bankrupt Silicon Valley Bank, shares of American banks began to lose positions in the auction. Thus, Western Alliance securities fell by more than 44%, and First Republic Bank by almost 59%. Shares of banks PacWest, Zions and UMB Financial fell in price by 20.7-27.5%.

The next day, Axios reported that the administration of US President Joe Biden would soon face a crisis in the banking system. The publication notes that if the US government does not arrange a deal to save Silicon Valley Bank depositors before branches open on March 13, the Cabinet will face a catastrophic crisis.

At the same time, information appeared that the US authorities were not considering the possibility of buying out the bankrupt SVB. According to Treasury Secretary Janet Yellen, the current situation is different from the financial crisis of 2008, when the government bailed out many banks to protect the country’s economy.

In turn, Biden tried to convince American citizens that they can be confident in the security of the country’s banking system. He vowed to ask Congress and “banking regulators to tighten rules on banks and reduce the risk of this kind of bank failure happening again” and to protect jobs and small businesses in the country. According to the American leader, the situation around bankrupt banks will not affect taxpayers.

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