After the failures of Silicon Valley Bank (SVB) and Signature Bank, the big question for markets is whether the consequences resemble a major crisis like the one triggered by Lehman Brothers in 2008. Analysts note these situations are not the same. The current events involve unusual mortgage patterns and a niche US banking sector that is more volatile than Europe’s. Yet financial crises always carry the potential for unforeseen knock-on effects.
Fed to review Silicon Valley Bank regulation and oversight
1. Are the conditions the same as in 2008?
Before the Lehman Brothers collapse, warnings existed a year earlier as some banks faced trouble. In 2008, intervention by public agencies reshaped the landscape. Freddie Mac and Fannie Mae were aided, Bear Stearns was rescued by a government-backed deal with JP Morgan Chase, and the collapse of Lehman Brothers marked a turning point when Washington chose not to bailout the firm. Merril Lynch was acquired by Bank of America, and the insurance giant AIG received government capital. The U.S. Congress ultimately approved a sizeable rescue package, aimed at absorbing bad debt and stabilizing the financial system. The effect was a broad phase of risk reassessment and the transmission of stress through packaged assets that appeared secure yet carried hidden risks.
The collapse of the Silicon Valley bank in the USA affected markets across Spain and beyond
2. Is the source of SVB’s decline the same?
In 2008, the root problem was a bursting housing bubble driven by risky mortgage practices and lax risk controls in the process of securitizing loans. Some observers highlighted the role of incentives and risk ratings that encouraged the piling of risky assets. The term ninja, describing no income, no job, no wealth, arose to capture these dynamics. The explosion of asset packages with inflated credit ratings amplified the crisis as values fell.
Today, SVB faced a different mechanism. The bank focused on technology clients and startups, and it allocated deposits into long term government bonds. When interest rates rose, bond prices fell, reducing asset values on the balance sheet. Losses did not become real until the bank needed to meet large deposit withdrawals and faced reputational concerns. Regulators stepped in to protect depositors, especially those tied to the tech sector. Analysts point to a mix of regulatory gaps for midsize and regional banks and delayed detection of SVB’s stress as contributing factors. The objective now is to prevent broader contagion within the US midsize banking segment for the near term.
3. What is fear now?
It is premature to quantify the full extent of possible spillovers, but there is anxiety about risks spreading to banks elsewhere, including in Spain, as they hold large amounts of government debt and pursue conservative balance sheets. If trust falters, institutions may face the need to raise capital and liquidate assets, including depreciated bonds. That seeds insecurity. In continental banks, officials emphasize balance sheet resilience while noting contagion risks depend on the duration and scale of the US events. Analysts from Alantra Equities and others stress that the comparative risk profile differs from the 2008 crisis, yet vigilance remains essential.
4. Will the Fed and the ECB have to change their strategies?
One major question is how much the tremor might force the Federal Reserve and the European Central Bank to rethink monetary policy in the fight against inflation. In the euro area, some observers argue that the ECB should avoid abrupt shifts in its anti inflation stance, given robust liquidity in the banking system. However, higher policy rates still influence deposit yields and the cost of variable rate mortgages, shaping consumer and business borrowing decisions. The coming months will reveal how central banks balance the need to curb inflation with the goal of stabilizing financial conditions across regions.