While US regulators launched a plan to protect their deposits following the collapse of Silicon Valley Bank (SVB) this Sunday, another banking institution, Signature Bank, closed on the same parameters. The Department of the Treasury, the Federal Reserve (Fed), and the Federal Deposit Insurance Corporation (FDIC) announced that starting this Monday, customers will have access to all money deposited in the lending specialist. beginnings and also your recovered asset in New York. The aim is to limit the contagion effect and prevent the spread of panic in the international financial sector.
With this plan, the authorities ensure that taxpayers do not “take the risk” of the bank and that the deposit will be protected. “To provide access to credit for households and companies”. Instead, shareholders and some debt holders will not be protected by these measures.
The other bank to be rescued is Signature Bank, which mainly provides services to law firms and the crypto ecosystem, according to private media. At the end of last year, it had $110,360 million in assets and $88,590 million in deposits..
The New York Department of Financial Services is in contact with the FDIC and has coordinated with the FDIC for s.you close “in light of market events” and “follow trends” and that authority said in a statement that it is cooperating with authorities to “protect consumers” and “maintain the stability of the global financial system”.
“It’s a wise decision. That way infection to the rest of the system will be prevented and another financial crisis that could cost taxpayers a lot of public money and unemployment,” says economist José Carlos Díez.
additional funds
At the same time, the Fed announced that it would put in additional funds. “ensure that banks have the capacity to meet the needs of all depositors”. “The US banking system remains resilient,” they claimed.
The California-based Silicon Valley bank said in a statement last Wednesday, He would seek a capital increase to face his financial difficulties.It had saved approximately 1,800 million dollars from investments worth approximately 21,000 million dollars.
The liquidity problem of this financial group reveals that the increase in the exchange rates also decreases the value of the assets of the banks and this may affect their liquidity. The market recovered from stocks, just in case, and financial institutions around the world suffered in the stock market session on Friday. Ibex’s large banks left more than 4%.
The first victims were the four largest US banks, which lost $52,000 million on the stock market this Thursday. Moreover, S&P 500 banking sub-index fell as much as 7.5%. And these waterfalls moved to Europe.
The Stoxx 600 Banks index, which brings together Europe’s major financial groups, fell as much as 4.5% this Friday. Santander dropped as much as 6.5% of its value in the early part of the session, while Sabadell fell 5.72% and Unicaja fell 5.14%.. At the close of the session, Spanish side Sabadell (-5.26%) lost the most value this Friday, followed by Santander (-4.55%), Bankinter (-4.24%) and BBVA (-3.75). These results dragged the selector leaving 1.69%. Eurostoxx closed with 1.61% loss.
fear among investors
The losses of banks in the stock market last Friday show that investors fear that the situation of the SVB can be predicted to cover all banking groups. And what happens to this asset has to do with the increase in the exchange rate, that is, the increase in the price of money.. A priori, it may seem like the banking business, which is basically lending money to third parties and charging interest for it, will do better if the cost of money is higher. But this premise shows only part of the truth.
The fact is that banks, in addition to taking advantage of the increase in interest rates, also affected. Businesses keep bonds in their portfolios when they are trading on the secondary market and acquired when money was much cheaper before. What will happen to these assets now? They are much less valuable. In addition, the increase in interest rates increased the profitability of treasury bills and government treasury bills, which were already more profitable than bank deposits. This increases the money of the savers to be directed to these products, and this is to the detriment of the banks.
Liquidity problem arose when this asset tried to sell the bonds it held in its portfolio. Sold $21 billion worth of shares but still can’t cope with all the withdrawals it’s pulling. It attempted to raise $2,250 million in capital and recognized a loss of $1,800 million. “As a result of this lawsuit, the market is detecting depreciation in the portfolios of the banks. As the status of each is unknown, investors prefer to bail out and sell banking-related shares,” says Darío Garcia. An analyst at XTB.