Will the Silicon Valley Bank (SVB) shutdown, the biggest bank failure in the US since the 2008 financial crisis, spread? Financial analysts polled by AFP on Monday remain optimistic about the actions taken by the US authorities for the moment, but markets are worried.
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“We’re not in the same situation, it’s much more restricted, with a certain type of bank and a clientele from a certain industry (regional banks that work a lot with the technology sector, ed.)”, Eric Dor tells AFP an , Head of Economics at the IESEG Business School.
He assures that “normally with the measures that are being taken in the United States, it should calm down, and in Europe we are not at all concerned, we don’t have as many innovative technological start-ups as in the United States. !“.
The SVB remains “quite a special case”, adds Lionel Melka, partner at the investment company Swann, according to which the trend was accentuated by the “suddenness” of the insolvency, but “it will calm down” and the banking crisis is already with the measures of the American authorities “restricted”.
The latter announced a series of measures to reassure individuals and companies about the health of the American banking system. In particular, they will guarantee all deposits of the bankrupt bank.
The Federal Reserve (Fed) – the US Federal Reserve – has also agreed to lend to other banks the funds they need to fulfill their customers’ withdrawal requests.
“The banks are in a much stronger position than they were before the 2008 financial crisis,” said DWS, Germany’s largest asset manager, in a note.
On Monday, however, financial markets shook sharply, plagued by contagion risks in the global banking sector: California’s bank First Republic, which fell 30% in two sessions, was headed for a 60% drop on opening Monday. the western alliance by almost 50%.
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The Federal Reserve’s forced monetary tightening has contributed to the weakening of commercial banks and the slowdown in economic activity. It encouraged customers to invest their money in financial products that offered better returns than checking accounts, disrupting the cash-hungry new technology sector by raising the cost of borrowing.
“As always, it is a rate hike by the Fed that reveals the weaknesses of the system,” said Eric Dor.
The sharp rise in interest rates over the past year has also “revealed the post-COVID excesses”, which are being “corrected”, particularly for players who “mismanaged their positions”, in the new financial environment, adds Alexandre Baradez, analyst at IG France. added
Following the announcement of the FDIC’s takeover of SVB on Friday, many had worried about the fate of deposits frozen by the scheme’s failure. Around 96% of them were not covered by traditional deposit insurance.
“The guarantees provided by the Fed are important and have opened a window to provide additional liquidity,” said Alexandre Baradez, analyst at IG France.
“Initially the US authorities were reluctant to step in and bail out the banks, then reality catches up with them and they are forced to do something anyway. That doesn’t necessarily mean that the taxpayer pays,” emphasizes Eric Dor.
On the other hand, shareholders in SVB and also insolvent Signature Bank “will lose everything,” a Fed official said this weekend.