2 minutes agoSilicon Valley Bank default shocks financial markets
Periskopi(3 years ago)
(3 years ago)The bankruptcy of Silicon Valley Bank in the US caused shocks in financial markets. And although the American government staunchly intervened, concern over a possible domino effect on financial markets remains. Despite American authorities' measures on financial markets, concern continues following the bankruptcy of the two American banks. The Silicon Valley Bank, specializing in financing startups, [...]
Despite American authorities' measures on financial markets, concern continues following the bankruptcy of the two American banks. The Silicon Valley Bank, specialising in financing the startups, closed on Friday following failed capital increase efforts and was placed under state control. U.S. regulators closed yet another bank, Signature Bank from New York, after customers heavily withdrew their funds from this bank. According to President Joe Biden and US Finance Minister Janet Yellen, the money deposited by customers is secure and that costs will not be met by taxpayers, but by a security fund fed by banks.
US: President Joe Biden tries to calm global customers and markets
To prevent possible domino effects, American authorities intervened extremely firmly and, above all, stressed that customer deposits are safe. Because the nightmare of banks and financial supervisors is the so-called <x0-venging of banks”, that is, when frightened customers stream to withdraw their savings from banks. If a large number of customers do this, banks no longer have enough capital to respond to all demands. The consequences of “returns to banks” were seen during the 2008 global financial crisis.
Moritz Schularch, professor of economics at the University of Bonn and president of the Kiel Institute for World Economics, points out that the <x0 actions imposed” of the US have reduced the risk of further bank bankruptcy.
The US Finance Ministry and the US Central Bank took steps together over the weekend that should calm those who have deposited money in these two bank”, Schularch told the DW.
Influences on German Financial System Not Expected
However, uncertainty continues - even among banks in Germany. Following significant losses Friday (10.03) Frankfurt Stock Exchange continued its decline early in the week. “Investors are concerned that other banks could go bankrupt due to increased interest rates,” said IG Markets Christian Hanke.
But the Centre for European Economic Research does not expect any new global financial crisis following the closure of two American banks, which had a very special business model and therefore have no influence on the general banking system.
Even the German Banks Association said German banks are <x0-powered, stable and resistant”. Since the 2008 banking and financial crisis, German banks have massively increased their capital. “Forging banks in the US has no impact on the German banking system. The impact does not even have on the security of German deposits”, an association spokesman said. / DW
