In the last week, an issue moved the world of economy and technology, after the bankruptcy of two important banks in the United States: Silicon Valley Bank (SVB) and Signature Bank.
What were the reasons for what happened and how could this impact the financial market in Brazil? Detective TC separated the main information about the case to tell you.
American bank failure
The collapse of the SVB last Friday (10) is considered the biggest since the crisis that occurred in 2008 in the North American country, at the time of Lehman Brothers. To understand what happened now, it is necessary to go back a few years.
Between 2020 and 2021, there was a huge drop in interest rates in the United States. As a result, banks began to receive a large increase in deposits, which were invested in long-term pre-fixed government bonds – those that generate low returns at a high level of security.
Over time and the problems generated by the new coronavirus pandemic, combined with other local issues, inflation soared in the country. As a consequence, the Fed – equivalent to the US Central Bank – started to raise the interest rate from 0% to 5%. Thus, the liquidity of banks went down and resulted in crises.
The need to meet withdrawals of pre-fixed securities from its customers – something that added up to US$ 21 billion –, the bank had a loss of US$ 1.8 billion. The solution found was to raise a new offer of shares, but with a value 60% lower. Thus, there was another US$ 42 billion of sales by investors.
The so-called “domino effect” occurred two days later, when Signature Bank also declared bankruptcy. The two institutions – unrelated to each other – are guaranteed by the FDIC – similar to the Brazilian Fundo Garantidor de Créditos (FGC) –, which enables clients to guarantee the amount invested in bankruptcy cases.
However, the United States sets that limit at $250,000 – an amount exceeded by many accounts at these broken banks. To try to mitigate the problems, an emergency loan program was created, with US$ 25 billion in resources for banks, in exchange for US Treasury bonds, debts and mortgages.
Banking activity and future
SVB was founded 40 years ago in Silicon Valley. It consists of a local institution, aimed at serving startups and other technology companies with difficulties in obtaining credit through large banks.
It was considered the 16th largest bank in the United States, with assets of $209 billion and deposits of $175.4 billion, at the end of 2022.
Now, the tendency is for Silicon Valley Bank to be bought and incorporated by other financial institutions. The scenario would help reduce concerns in the market and oscillations in stock markets.
In turn, Signature Bank was founded in May 2001 and operated in the cryptocurrency sector, holding several companies in this segment. Shortly before the crash, recent information reveals an investigation by the Department of Justice in Washington and Manhattan, as well as the Securities and Exchange Commission.
The operations – which include inspecting those who open accounts and checking for signs of criminality in transactions – were focused on detecting possible money laundering by customers. However, so far, there is still no evidence that this has affected the institution’s bankruptcy.
While SVB has a path that seems well defined, Signature Bank would have more trouble getting back on the market. This is because – despite being under the control of New York controllers after the crash – the history of cryptocurrencies does not please investors.
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Impacts in Brazil
Despite the fact that the FED and the US government acted quickly to avoid any major effects, there is still concern that the failures of US banks will have an impact on Brazil and other countries.
The explanation is simple: many customers, worried about their money, can generate a rush to withdraw their assets from smaller banks in the country, something that would generate a huge loss for these institutions.
Rumors also claimed that Brazilian fintechs would have money invested in SVB. The fact is that Brazil is among the most relevant markets for the institution, since there has been a branch of the institution since 2007 in the country, aimed at local startups. However, it is still not known for sure which companies held assets in the bank.
Fintechs take a stand
Among those involved in speculation are Nubank, C6, Inter and PagSeguro. The four have sent press releases in recent days to deny any exposure or relationship of the respective companies and their subsidiaries with Silicon Valley Bank.
The notes have the effect of calming the shareholders and customers of these institutions, to curb any type of divestment or caution during this period of recomposition of North American banks.
So, what do you think about the bank failure in the United States? Do you believe that this crisis has the potential to reach Brazil? Join us!