US Banking Crisis - The Beginning of THE Recession?
$SVB Financial(SIVB.US$ lost over 60% of its market value in a day after the tech-focused lender (parent of Silicon Valley Bank) reported that they nearly lost $2 bil selling assets after a larger-than-expected in deposits. This however shouldn’t come as a surprise as SVB have been piling up their unrealized losses which was made available through its earnings reports. Following the saga, the four largest banks in the US (JP Morgan Chase, Bank of America, Citigroup, Wells Fargo) lost $52 bil in market cap (in a day) as well.
Collectively, the banking industry has more than $600 bil in unrealized losses on its securities holdings as they hoard extra cash in bonds when interest rates were super low (back then in 2020), but now that the US Federal Reserve has hiked more than 475 bps of fed funds rate in a little bit over a year, the prices of bonds have gone down significantly.
Traditionally, banks won’t have to sell their bonds at a loss unless they have big fund outflows if customers withdraw in masses, in that case, they would have no choice but to be forced to sell their assets to cover deposit withdrawals. However, such a scenario is less likely banks usually have enough regulatory reserves to cushion such impact, even if customers are starting to move their deposits into bonds with higher yield. Banks don’t incur losses on their bond portfolios if they held onto it until maturity, unless they are forced to sell them at a loss to raise cash.
But, the fear of such possibility has sent shockwaves through the entire US banking industry, heck, the US market as a whole. Investors were already put on alert when Silvergate Capital Corp announced bankruptcy (one of the crypto market’s top banks) announced bankruptcy after the 2022 crypto market meltdown which sparked a deposit run that forced it to sell billions of dollars of assets at a steep loss. Analysts are saying that this could be the crack in the financial industry.
Drop me a Like if you enjoyed this read - stay tuned for more!
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
- YouTube finance content creator (>65k subs)
- Specializes in US stock and ETF investments
- Huge fan of Tech companies
23KFollowers
5Following
44KVisitors
Follow
Mcsnacks H Tupack : They lost their money from backing of Cryptocurrency for $Silvergate Capital (SI.US)$
Revelation 6 Mcsnacks H Tupack : Another cryptocurrency victim. There will be more. Backing nothing with something is always a bad idea. If I went to the bank and asked to borrow money for an imaginary car they would say no way. Yet they full steam ahead into cryptocurrency without thinking twice.
Mcsnacks H Tupack Revelation 6 : It's all been planned out since 2010. Crypto currency has served its purpose-to get people used to the idea of digital currencies. Now they remove the $900 billion dollars of cryptocurrency and use it to fund the banking system. January 2025 a bill will be passed making it illegal for banks and companies to accept cash or coins as a payment method.
Mcsnacks H Tupack Revelation 6 : All of SVB customers are having their accounts turned over to Brex the all digital bank. Forcing digital upon us. Wait until the next "outbreak" happens. They are going to blame it on dirty dollar bills being the cause of the viral spread.
Ziet Invests OP : Thanks for chipping in your insightful comments!