It all started two years ago while the central economies held near zero rates to boost the economies after the blow caused by the crisis caused by the coronavirus pandemic. The banksfor his part, like the American BLSthey invested the deposits of their clients in long-term treasury bonds in search of performance.
So much BLS -the sixteenth largest bank in USA– as signature specialized in a defined portfolio of clients: the tech firmsa sector that had a real “boom” during the pandemic, which meant that deposits in the SVB grew from US$61 billion at the end of 2019 to US$189,000 million in late 2021.
but with a inflation which reached unprecedented records in 40 yearsmain central banks of the world, like the Federal Reserve (Fed)they started a strong monetary adjustmentone of the fastest in history, leading the interest rate, in the case of the fedto a range between 4.75% and 5% in a year.
This was a blow to the banks like SVB: its customers, who depend on financing, having no profitability in the early stages of their activity, had to resort to their deposits, and the bank, in order to support this bleeding, was forced to sell the bonds doing it aa lossas they had lost much of their value after the rate hike.
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It is believed that the US banks have almost $620 billion in potential losses for having invested in these types of papers, if they had to sell, according to the Bloomberg news agency.
After announcing a loss of u$1.800 million in the last trimester BLS began to suffer a strong cumshot who emptied a quarter of his coffers in 48 hourswhich ended up deriving last Friday the 10th in the intervention under federal control of the bank in what was the biggest drop since Lehman Brothers in 2008.
A similar run later impacted deposits of signaturewhich also ended up being intervened.
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Image by Gerd Altmann from Pixabay
Faced with the fear of a corralito and the possibility of cutting the payment chains in the companies, the Government promised that all the clients of the two banks would be able to make use of your depositseven those over US$250,000, which by law are not insured, something that -according to the secretariat of the Treasure, Janet Yellen– be exceptional.
The president himself USA, Joe Bidenreiterated on various occasions this week that deposits were safe and promised to do “whatever it takes” to augur the banking system.
Biden also called for toughening the penalties for banker negligence. The directors of the SVB are being investigated, among other reasons, for sell $3.6 million worth of stock before it collapseswhile the fed will reveal if there was failures in bank supervision.
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The objective
On the other hand, the fed put into deposition additional funds and facilitated the we lend to banks to guarantee the liquidity of its clients
Another effect of the financial tremor was a way of alerting the authorities, who deliberate among give relief to the industry or continue with your battle against inflation. On March 21 and 22, the Fed’s monetary policy meeting will be held to decide whether to apply new rate hikes and in what percentage.
Market expectations are for the rise to be much less than that carried out on previous occasions, since the crisis that its financial market is going through, partly linked to the level and speed of rate rises, fuels the expectations of recession and cooling of the economy.
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However, this week data from employment who supported the recovery of economic activity in USA and the strengthening of the creation of Job positions. Under normal conditions, this usually represents a signal that feeds the possibility of continuing to adjust rates, since it indicates a good performance of the economy.
Contagion effect?
Meanwhile in Europe echoes were also felt: the actions of the Swiss Credit Suisse fell this week to a historical low after its main shareholder – the Saudi National Bank – refused to inject more capital.
The Swiss entity, hit for years by the corruption, illegal activities of your clients and exposure of your investments to collapsed fundsacknowledged this week “weaknesses” in its internal controls and a run of more than US$100,000 million in recent months.
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Neither said rescue nor that of the also American First Republic they avoided another loss day on Friday in global stock markets. The systemic risk of Credit Suisse -It is one of the 30 systemically relevant banks in the world, according to the International Financial Stability Boardand has a balance sheet that doubles the one he had Lehman Brothers when it fell- led to a injection of US$54,000 million by the central bank, while looking for a way out.
According to the British newspaper Financial Times, UBSthe main Swiss competitor, is negotiating a partial or total purchase.
Source: Ambito
