Publisher: Maaal International Media Company
License: 465734
The crisis that afflicted the “Silicon Valley” bank, which the US authorities decided last Friday to close, sparked a wave of panic across the banking sector, amid questions in the markets about the consequences of the largest US bank bankruptcy since the global financial crisis in 2008.
Where the bank was unable to meet the huge withdrawals made by its customers of their money, who are especially active in the field of technology, and its attempts to increase capital quickly did not succeed.
After it closed the Californian bank, the American Deposit Insurance Agency imposed its supervision on the institution, which is expected to reopen later under a new name.
The American “Silicon Valley” bank is a well-capitalized institution that seeks to raise some funds. However, within 48 hours, panic over large withdrawals by the bank’s customers led to the termination of the bank’s 40-year service.
Banking crisis:
On Friday, regulators closed the bank and confiscated its deposits in what is known as the largest US banking failure since the 2008 financial crisis and the second largest ever.
Downward spiral:
The company’s downward spiral began late Wednesday, when it surprised investors with news that it needed to raise $2.25 billion to shore up its balance sheet. This was followed by the rapid collapse of the highly respected bank that had grown alongside its technology clients.
Rising fears:
Concern has been growing among tech workers, especially since the collapse of Silicon Valley represents not only the biggest bank failure since Washington Mutual in 2008, but also the second-largest retail bank failure in the US. For her part, US Treasury Secretary Janet Yellen called on many financial sector regulators to discuss the situation, and assured them that she was “fully confident” in their ability to take appropriate measures and that the banking sector remains “resilient.”
Outside the bank’s headquarters in Santa Clara, California, a few anxious customers wondered how they could access their money, and some tried to guess what was going on behind closed glass doors.
As one customer, who did not wish to be named, said: “It is not good. Many large capital owners have very high deposits in the bank. As a junior manager, he used the bank to pay his employees and worries about them
Market response:
The panic movement began in the markets, after the bank announced that it was seeking to increase capital quickly to keep pace with the huge withdrawals of its customers, without success, and sold financial instruments for $ 21 billion (19.7 billion euros), and lost $ 1.8 billion. (1.7 billion euros) in this process. The announcement surprised investors and raised concerns about the safety of the entire banking sector, especially with the rapid rise in interest rates, which reduces the value of bonds in their portfolios and increases the cost of credit.
Its global impact:
The four largest US banks lost $52 billion (49 billion euros) on the stock market on Thursday, and in the aftermath, Asian and then European banks defaulted.
Outside the United States in Paris, Societe Generale, the second largest French bank, lost 4.49%, BNP Paribas 3.82%, and Credit Agricole 2.48%. Elsewhere in Europe, Germany’s Deutsche Bank fell 7.35%, Britain’s Barclays Bank 4.09%, and Swiss bank UBS 4.53%.
On Wall Street, the big banks recovered Friday from the previous day’s defeat: JPMorgan Chase rose 2.54% while Bank of America and Citigroup lost less than 1%.