What’s going on:
This Sunday, federal regulators revealed the closure of yet another bank. This time it was Silicon Valley Bank, but all depositors will be recompensed fully.
This is the third large-scale bank failure in the space of a week, following on from the dissolving of Signature and Silvergate — a California-based provider of loans to cryptocurrency firms — who declared its cessation and liquidation of assets on Wednesday.
“Silvergate was brought down by the turmoil in the cryptocurrency world after the collapse of FTX, whereas SVB’s fall was due to losses sustained on its holdings of Treasury bonds following the Federal Reserve repeatedly raising interest rates — making those bonds fall in value,” coworking industry financial expert Jonathan Price told Allwork.Space.
Washington is working rapidly to prevent the repercussions of its collapse from spreading throughout the financial system, according to The New York Times.
Why it matters:
The FDIC has stepped in to take over Silicon Valley Bank in what is the biggest banking failure since the 2008 financial crisis, which is now sparking fears of wider problems in the industry, with nearly $175 billion in customer deposits now under the regulator’s control.
In response, the Federal Reserve announced an emergency lending program, in partnership with the Treasury, to ensure that eligible banks have the funding to meet the needs of all their depositors.
How it’ll impact the future:
Fearing for their own financial security, many regional bank customers began to withdraw their deposits and move them to bigger banks, prompting concern amongst officials and economists. What could have been an isolated incident could spiral into a far-reaching financial crisis.
