The collapse of Silicon Valley Bank (SVB), the 16th largest bank in the US, has caused complete market turmoil in the US and Europe.
Despite US financial authorities and even the US President announcing a plan to ensure that depositors could retrieve their funds, smaller US banks, including Western Alliance Bancorp and Zions Bancorporation, suffered massive market share price losses.
‘At least 20 regional US banks experienced serious trouble and their stock prices plunged’
At least 20 regional US banks experienced serious trouble and their stock prices plunged, causing trading halts. The chaos has spread outside the US, even here in SA. Ironically, it kind of helped the Rand recover some of its recent losses verse the Dollar though.
Internationally the Stoxx Europe 600 Banks index showed the top 42 EU and UK banks fell 5.6 per cent, and Japan’s Topix Banks index fell by over 7%. These figures translate into billions and billions of Rands value and are quite scary.
To give you an idea of how bad the knock on effect can be, just consider what happened on the first day of the chaos. The four biggest US banks lost $52 billion in market value in just that first day of panic alone.
No wonder (relatively) smaller banks across the US and internationally are scared and were so relived when the US Government began to step in so quickly.
Unlike back in 2008 when responses were slow, the politicians and bankers all worked after hours and over weekends to try address the crisis and take some action to calm the markets.
Tough times Provide Opportunities For Some
With every disaster comes opportunities however and “fortune favours the bold” as they say.
In a clever move HSBC has bought the UK arm of SVB, which has over 3,000 business customers, bringing relief to UK tech firms that warned they could go bust without help. Customers and businesses who were unable to withdraw their money can now access it as normal.
‘Those who found the right timing have been able to coin it”
The HSBC CEO said that the only thing wrong with the UK part of the bank was its name and how nervous clients were becoming. So, they swooped in and have taken over all the clients and their obligations for just 1 British pound.
The volatility caused by SVB’s collapse has also provided an opportunity for brave investors to make some rather staggering returns as bank stocks swung wildly up and down. Those who found the right timing have been able to coin it.
Angry People Are Starting Court Cases Already
SVB Financial Group and two top executives have already been sued by their own shareholders over the collapse of the Bank.
They are accused of concealing how rising interest rates would make SVB particularly susceptible to a bank run. This is probably the first of many other cases that will come along as people look for someone to blame (not the nervous clients who ran and took out their money of course).
It seems its already time to start the blame game.