Operation

The SVB does not act in the same way as traditional banks. In other words, it is not their goal to leave money to customers and enrich them with interest, or to collect only for saving money. Provides great facilities to certain customers.

Several start-ups in California have earned significant liquidity gains from venture capital funds. To understand it in some way, these companies put a lot of money, but little security. And by 2021, the problem was that banking was very liquid, but unsafe, and it wasn't easy to sell that deposit.

So he started buying government treasury bonds. The money that had not been borrowed and deposited in the bonds was 56% of its total; in a traditional bank the amount of the bonds is around 15%. Before sinking, the SVB had 209.000 billion dollars in assets, of which nearly 180,000 million were short deposits of start-ups. For the long I had almost nothing.

Raising interest rates

When Koronabirusa took over the interest rates of EE.UU, which grew a bit, today they are 4.5%, especially due to the economic crisis and last 2022. Raising interest rates is a concrete and undisputed measure to combat inflation.

In the case of traditional banks, in fact, by raising interest rates, more money is made. More is paid for customer deposits, but more is also paid for the revenue from financing, as loans are given more expensive.

In this case also the situation of SVB is different. As it is trapped in government long-term bonds, and these bonds lose value by raising interest rates, the bank has suffered significant losses, according to The Financial Times, of around $16 billion. Unable to maintain bonds, interest rate increases force bonds to be sold at a lower price than the purchase price.

Market chain

Last Wednesday SVB saw the need to increase capital considerably and made a petition, but the risk and concern prevailed among customers. According to various media, some financial institutions and advisors started recommending to their customers the withdrawal of SVB money. The SVB quickly fell, followed by Signature Bank for its close relationship.

The US authorities have announced that they will ask for “tranquillity” and take action, such as a commitment to protect all deposits from their customers. Also in the United Kingdom, the HSBC bank will purchase the SVB subsidiary in exchange for a pound, FT has announced.

The ghost stretches east

In the Spanish state, IBEX 35 suffered particularly large falls. In total, the group suffered losses of 3.5% and fell on the stock market below 9,000 points. You see clearly where I was on 10 March.

 

 

 

 

Within the group was the Sabadell Bank, the most affected. It has lost more than 16% in the last five days.

 

 

 

 

Large losses also by the Banco Santander.