March 13, 2023: Silicon Valley Bank Collapse Ignites Fears of Financial Crisis

Biden calls SVB collapse chaotic and vows to hold those responsible to account.

US President Joe Biden has pledged to hold accountable the people responsible for the bankruptcy of Silicon Valley and Signature Bank while seeking to reassure Americans that their deposits are safe.

“I am deeply committed to holding those responsible for this mess accountable and continuing our efforts to strengthen oversight and regulation of the big banks, so we don’t find ourselves in this position again,” Biden said.

“The American people and American businesses can be confident that their bank deposits will be there when they need them,” the president added in remarks also posted on Twitter.

US Treasury Secretary Janet Yellen confirmed Sunday that the government wants to avoid the impact of the Silicon Valley bankruptcy on the rest of the banking system. Washington has ruled out saving the institution by pumping public funds into it but has confirmed that it will protect its deposits.

On Sunday, US financial authorities announced a rescue plan to ensure that all Silicon Valley bank depositors can get their money back “in full.”

“Depositors will have access to all of their funds starting Monday, March 13,” said a joint statement issued by the US Treasury Department, the Federal Deposit Insurance Corporation, and the US Federal Reserve.

HSBC acquires the SVB unit in Britain.

On Monday, March 13, HSBC announced that it had acquired a unit of Silicon Valley Bank in Britain for one pound sterling. “This acquisition has an excellent strategic impact on our business in the UK,” said Noel Quinn, chief executive of HSBC, in a statement.

British Chancellor of the Exchequer Jeremy Hunt said the government and the Bank of England had facilitated the sale of the Silicon Valley unit in Britain to HSBC in a move that would protect deposits without support from taxpayers.

“This ensures that customer deposits are protected, and banking can continue as normal, without the backing of taxpayers, and I am delighted that we have found a solution in such a short time,” Hunt said.

He continued by saying that “HSBC” is the largest bank in Europe, and Silicon Valley Bank customers in the UK should feel reassured about this acquisition’s strength and security.

It comes after US authorities moved to shore up deposits and stem any broader fallout from the sudden collapse of Silicon Valley Bank, which the British unit is tracking.

European stocks fell amid the repercussions of the SVB crisis.

European stocks fell at the beginning of the week’s first sessions amid investors’ focus on the repercussions of the SVB Bank crisis.

HSBC announced on Monday the purchase of the British arm of the troubled US lender Silicon Valley Bank for one pound sterling, provided that customer deposits are protected as part of the deal.

The Stoxx Europe 600 index fell by 0.54% to 451 points at exactly 08:06 GMT.

The British FTSE 100 index fell by 0.30% at 7725 points, the German DAX index fell by 0.33% to 15376 points, and the French CAC index fell by 0.58% at 7178 points.

French Finance Minister Bruno Le Maire said Monday: The collapse of the US bank SVB does not pose any danger to the French banking system.

The ECB is still expected to raise interest rates by 50 basis points this week, but it must at least acknowledge the risks to financial stability, which could make it a moderate hike, as the Eurogroup meets later today.

Nikkei falls as banking stocks struggle, influenced by the SVB collapse.

The Japanese Nikkei index fell more than 1% Monday, March 13, and banks led the losses, as investors worried about the potential repercussions of the collapse of the US bank Silicon Valley.

Automakers also fell under pressure from a strong yen, with Mitsubishi Motors leading the decline. The Nikkei index fell 1.11% to 27832.96 at the close, although it remained far from the lowest level during the day of 27631.53, the weakest since March 2. The broader Topix index fell 1.5% to 2000.99 after touching 1987.00 for the first time since March 1.

The banking sector was the worst performer among the 33 industrial groups, as it decreased by 4.01%, followed by the insurance and securities sectors, which fell by 3.66% and 2.82%, respectively.

Japan’s top government spokesman tried to allay fears about the fallout from the Silicon Valley bank’s collapse, saying he did not see it affecting Japanese lenders.

Transportation equipment makers fell 2.34% as the yen rose to a one-month high against the dollar.

A local plunge followed chaos on Wall Street on Friday, as bank stocks plunged after Silicon Valley bank became the biggest bank meltdown since the financial crisis.

“Shares will likely rebound to previous levels by Tuesday,” said Kazuo Kamitani, an equity analyst at Nomura.

Concordia Financial Group was the worst-performing lender on the Nikkei, down 5.29%, and Mizuho Bank fell 4.94%.

Mitsubishi Motors topped the losers on the Nikkei index, down by 6.46%, followed by Mazda, which fell by 5.96%, and Nissan, which fell by 4.95%.

The cryptocurrency market exceeds a trillion dollars after the US government intervention.

Cryptocurrencies rose on Monday, following moves by the US government to protect depositors at a collapsing Silicon Valley bank and HSBC’s purchase of the US lender’s UK arm.

Bitcoin rose nearly 10% at 7 GMT at $22,560.20, its highest level in 10 days, according to CoinDesk data, while ether also rose about 10% at $1,614.89. On Monday, the cryptocurrency market gained over $70 billion in 24 hours and jumped above $1 trillion.

It’s been a rollercoaster ride for the cryptocurrency markets after the collapse last week of Silvergate Capital, a significant lender to the crypto industry. On Wednesday, Silvergate Group said it was winding down its operations and liquidating its bank. Then came the Silicon Valley bank collapse on Friday, the biggest bank failure since the 2008 financial crisis.

Silvergate and SVB put their money into US Treasury bonds, which lost value as the US Federal Reserve raised interest rates. These banks were forced to sell the bonds at a loss to support their capital base. This was followed on Sunday by the closure of Silvergate Bank, a vital friend of the cryptocurrency industry, by US regulators to stem any contagion of the broader banking sector.

And investor confidence was boosted by the moves by regulators supporting SVB and the protection of depositors in these institutions.

The US Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation said on Sunday that SVB depositors would have access to all their funds starting Monday.

“Taxpayers will not bear any losses associated with Silicon Valley’s decision,” regulators said. They added that depositors at Signature Bank would receive their deposits in full.

On his part, Vice President of Development at Luno, Vijay Aiyar, said, “Given the Fed’s announcement over the weekend of support for banks, specifically Silicon Valley, the markets have turned optimistic knowing that depositors’ funds are safe and that Liquidation of major potential banks supporting the crypto industry has been avoided.” In addition, HSBC said it had agreed to take over the UK arm of SVB for £1 ($1.21).

The dollar is falling with intervention to curb the repercussions of the collapse of the Silicon Valley bank.

The dollar fell Monday, March 13, as the US authorities intervened to curb the repercussions of the sudden collapse of Silicon Valley Bank SVB, as investors hoped that the US Federal Reserve would follow a less hawkish monetary path.

The US government announced several measures and said all SVB depositors would have access to their deposits from Monday.

Officials also said that depositors at Signature Bank, which New York state financial regulators shut down on Sunday, would be compensated, and taxpayers would not suffer any losses.

The dollar index, which measures the greenback against six currencies, fell 0.153% to 104.080. The Japanese yen rose 0.34% to 134.52 against the dollar, its highest level in a month, as investors moved towards safe-haven Asian currencies.

The euro rose 0.44% to 1.069 dollars, and the latest pound sterling price was 1.2085 dollars, up 0.47% during the day. The Australian dollar rose 0.79% to $0.663, and the New Zealand dollar rose 0.36% to $0.616.

Gold is rising as the dollar weakens and fears mount after the closing of Silicon Valley bank.

Gold prices rose Monday, March 13, to their highest levels in more than five weeks, with the dollar’s decline, while fears raised by the most significant collapse of an American bank since the financial crisis in 2008 pushed investors towards the precious metal, which represents a haven.

And gold rose in spot transactions by 0.5% to 1877.30 dollars an ounce after hitting its highest level since February 3, earlier during the session, at 1893.96.

US gold futures rose 0.8% to $1,882.10 an ounce.

And US officials intervened to curb the financial repercussions of the Silicon Valley bankruptcy, saying that all depositors could dispose of their deposits starting Monday.

As for other precious metals, silver rose in spot transactions by 0.6% to $20.63 an ounce, platinum rose 0.3% to $961.87 an ounce, and palladium rose 0.5% to $1385.56 an ounce.

The rise in oil prices, supported by the recovery of Chinese demand and the weakness of the dollar

Oil prices rose on Monday, after a weak start, as recovering Chinese demand and a weaker dollar supported a market wary of further hikes in US interest rates. By 06:12 GMT, Brent crude futures rose 28 cents to $83.06 a barrel. US oil futures rose 29 cents, or 0.38%, to $76.97 a barrel.

Market sentiment is fragile as rising US crude oil inventories heighten fears that the Federal Reserve will further tighten monetary policy, analysts at ANZ Bank said in a note Monday morning.

A weaker dollar makes oil cheaper for holders of other currencies, which supports oil prices.

Prices were also supported by comments made by Amin Nasser, CEO of Saudi Aramco, on Sunday regarding Chinese demand for crude.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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