Silicon Valley Bank collapse sends shockwaves across global markets

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The massive deposit withdrawals in the US have highlighted the fragility of many mid-tier banking institutions.


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The collapse of Silicon Valley Bank sent further shockwaves across the global financial sector after tens of billions were wiped off the stock market value of some of the world’s largest banks and credit rating agency Moody’s put several medium-sized institutions on notice for downgrades. Is. ,

As fears over the stability of Silicon Valley banks surfaced for the first time on Thursday, an astonishing $46 billion was wiped from the market capitalization of the six biggest US banks by the close of the market on Wall Street last night, while euro swap spreads widened. Which is a financial indicator. Market tension reached its highest level in five months.

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Britain’s biggest banks have also taken a hit, with the top four losing a combined £22.4 billion in market value since Friday morning.

HSBC took its biggest hit in the UK when shareholders did not like the news that the bank had agreed to buy the UK branch of Silicon Valley Bank for £1. Its shares fell 4.5% yesterday and are down 1.3% this morning to 560p.

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Bill Ackman, the billionaire investor behind FTSE 100 component Pershing Square Holdings, warned on Twitter last night that the sector could be “one bank failure after the next” without government intervention.

“Consumers now understand that when a bank stock falls, it is only a matter of days before the bank fails because of the demand for liquidity from its depositors,” he said.

“Until this problem is resolved, our banking system is at risk.

“The alternative is one bank failure after the next. The weakest three have already fallen. The market is already telling you who is at number four.

The number of deposit withdrawals in the US has highlighted the fragility of many mid-tier banking institutions, which lack the same degree of regulatory oversight and lack of government support for deposits.

Moody’s on Sunday downgraded the ratings of shuttered bank Signature to C overnight after it was shut down by regulators in New York, while placing six more mid-sized banks including First Republic and Western Alliance under review for downgrades .

Ian Manocha, CEO of Gresham Technologies, which supplies data control and cash management software to financial institutions, said the banking shock exposed questions over the US government’s interpretation of the Basel accords, agreed globally in the wake of the 2008 financial crisis. A collapsing set of banking standards.

“The US’s application of the Basel accords gave an excessive level of flexibility to certain levels of institutions,” he said.

“For those community institutions the application of the rules was relaxed and we didn’t have the same selective flexibility we have in Europe and the UK. This explains why the Silicon Valley bank survived eight months with no chief risk officer.

While the UK branch of the Silicon Valley bank was frozen yesterday, it is unclear whether its customers will remain with the beleaguered institution after venture capital businesses urged tech startups to open new accounts elsewhere to diversify risk. Will you return to banking or not? London-listed software firm Eagle Eye said it had at least 3 million pounds in deposits with SVB US before Friday’s collapse, as well as a 5 million pound credit facility with SVB UK. The firm told The Standard that its future relationship with the bank is under review.

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