The New York Stock Exchange (NYSE) building in New York on March 23, 2021 (AFP/Angela Weiss)
Silicon Valley Bank (SVB) was closed on Friday by US authorities, the biggest bank failure in the United States since the 2008 financial crisis blowing a slight wind of panic on the markets.
The bank was no longer able to cope with the massive withdrawals of its customers, mainly tech players, and its last attempts to raise fresh money were unsuccessful.
The American authorities therefore took official possession of the bank and entrusted its management to the American agency responsible for guaranteeing deposits (FDIC).
US Treasury Secretary Janet Yellen called several financial sector regulators on Friday to discuss the situation, reminding them that she had “full confidence” in their ability to take appropriate action and believed that the banking sector remained ” resilient”.
– Nervous customers –
Little known to the general public, SVB had specialized in the financing of start-ups and had become the 16th American bank by the size of assets: at the end of 2022, it had 209 billion dollars in assets and around 175.4 billion in deposits.
His disappearance not only represents the largest bank failure since that of Washington Mutual in 2008, but also the second largest failure of a retail bank in the United States.
Outside the bank’s headquarters in Santa Clara on Friday, a few nervous customers wondered how they might access their funds, some trying to guess what was going on through the closed, glass doors.
On the storefront, a paper from the FDIC indicated that they might, from Monday, withdraw up to 250,000 dollars.
“It’s not good. A lot of the bigger (venture capital firms) have very high deposits here,” remarked one client who declined to be named. Boss of a start-up, he used the bank to pay his employees and worry regarding them.
In the markets, the panic movement began on Thursday, following SVB announced that it was seeking to quickly raise capital to cope with the massive withdrawals of its customers, without succeeding, and having sold 21 billion dollars worth of securities. financiers, losing $1.8 billion in the process.
The announcement surprised investors and revived fears regarding the soundness of the banking sector as a whole, particularly with the rapid rise in interest rates which is lowering the value of the bonds in their portfolios and raising the cost of credit.
The four largest US banks lost $52 billion on the stock market on Thursday and in their wake, Asian and then European banks faltered.
In Paris, Societe Generale lost 4.49%, BNP Paribas 3.82% and Crédit Agricole 2.48%. Elsewhere in Europe, the German bank Deutsche Bank dropped 7.35%, the British Barclays 4.09% and the Swiss UBS 4.53%.
On Wall Street, the big banks rallied on Friday following the rout the day before: JPMorgan Chase took 2.54% while Bank of America and Citigroup lost less than 1%.
Medium-sized banks or more concentrated on one type of customer were on the other hand more in turmoil, First Republic for example dropping nearly 15% and Signature Bank, close to the cryptocurrency community, 23%.
– Safeguards –
“As is often the case in finance, the problem did not come from where we expected it,” explains Alexander Yokum, of the CFRA firm. “Many observers wondered regarding the debt that accumulates on credit cards or in the office real estate market. We did not expect a + bank run +”, a chain reaction that begins with massive customer withdrawals, he told AFP.
Stephen Innes, an analyst at SPI Asset Management, wants to be reassuring, estimating “low”, in a note, the risk “of a capital or liquidity incident among the big banks”.
Since the financial crisis of 2008/2009 and the bankruptcy of the American bank Lehman Brothers, banks have had to give reinforced guarantees of solidity to their national and European regulators.
For example, they must demonstrate a higher minimum level of capital intended to absorb any losses.
For Morgan Stanley analysts, “the funding pressures facing the SVB are very particular” and the other banks are not facing a “cash shortage”.
