Banks collapsing
As of March 12th, 2023, two banks have collapsed in the United States. The first bank was Silicon Valley Bank in Santa Clara, California. The second bank was Signature Bank in New York. This seems to be a huge topic as of recently; people are extremely worried. How did this all happen?
Well, for starters, the Silicon Valley Bank collapsed after a bank run, and a lack of diversification on March 10th, 2023. A bank run is when the bank loses ‘confidence’ and customers start to withdrawal their deposits. Diversification is when it leads different institutions to hold similar and correlated portfolios, which implies increasing similarities between exposure profiles of different banks. After reading a report called “Silicon Valley Bank collapse explained: What you need to know” by Amanda Hetler, these are the facts about Silicon Valley bank. “Many bank customers withdrew money as venture capital started drying up. Silicon bank didn’t have the cash on hand to liquidate these deposits because they were tied up in long-term investments. They started selling their bonds at a significant loss, which caused distress to customers and investors. Eventually, the bank collapsed.” Most people did not see this coming. It seems the bank made mistakes that lead the bank to collapsing.
We still have a second bank that collapsed, the Signature Bank in New York on March 12th, 2023. “Old-School’ Signature Bank Collapsed After Its Big Crypto Leap” by Max Abelson says, “Signature’s collapse on Sunday, when New York regulators swooped in after a surge of panicked withdrawals, was not what he’d had in mind. It was the third-largest bank failure in the US ever, behind Washington Mutual in 2008 and Silicon Valley Bank’s cataclysmic drop days ago. But Shay’s lender wasn’t a national giant or a new-fangled tech star, it was old school.” From the same article, “On Tuesday, state regulators said they intervened after losing faith in the firm’s management, as the bank failed to provide reliable and consistent data as the industry came under pressure.” It seems that the management of the bank is making people believe that the management has failed to do what they needed to do to keep the bank from not collapsing.
People are getting scared about these two banks collapsing in the same week, because banks collapsing is what lead to the great depression. Do you think we should be worried? After analyzing and reading multiple articles about this case, it definitely seems to be something that more and more people are getting involved in, more people are getting worried about it but at the same time, more and more authorities are working to fix this issue. Hopefully, this doesn’t lead to any bigger crisis.
