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There have been numerous financial industry crises recently, which have created tremendous chaos. Initially, when FTX’s stock fell, another victim was claimed by the collapse of the well-established US Bank Silvergate capital.
In a collapse that shook international markets, SVB Financial Group, a lender with a focus on startups, on March 10 became the largest bank to fall since the 2008 financial crisis. The passing of Signature, which had $100 billion in assets, is a shock to many professional services companies that had grown dependent on it.
Lender Credit Suisse, situated in Zurich, faced the effects of the contagion brought on by Silicon Valley Bank’s failure. In the opening session of trading on Switzerland’s stock exchange, shares of Credit Suisse hit a new low.
These incidents never occur in isolation and almost always affect the market more severely.
Will additional institutions be in jeopardy now? Read on.
Scott Hamilton on the collapse and its repercussions
Scott Hamilton who is the contributing editor in Finextra Research has explained the failure of SVB. Silicon Valley Bank (SVB) went bankrupt this week, taking with it a 40-year legacy rooted in the ingenuity and optimism of its namesake Northern California home. Everyone is wondering what will happen now that the over $200 billion deposit institution that may have banked about 50% of all IT businesses has gone bankrupt.
A review of recent events and possible outcomes of the SVB closure and, to a lesser extent, the failure of the smaller Signature Bank of New York reveals a wide range of opinions. While many believe that the breakdown revealed systemic problems, some claim that the worst of the crisis has passed.
Several regional banks’ shares were crushed over the weekend as a result of the SVB debacle. Three institutions with heavy concentrations in technology and venture capital experienced major ‘market hangovers’ from weekend events.
They are Western Alliance Bancorporation which has lost 84% to its March 8 close price just above $71 per share, First Republic Bank whose stock slumped to a mere $20, from $147, and Pacific Western Bancorp which declined over 50% since its previous close on March 10, leaving it trading at below $6 a share, compared to nearly $29 per share.
After the recent closure of Silicon Valley Bank (SVB), many corporations have disclosed their exposure to the now-collapsed bank. Companies that have disclosed exposure with Silicon Valley Bank are Circle: $3.3 billion, Roku: $487 million, BlockFi: $227 million, Roblox: $150 million, Ginkgo Bio: $74 million, IRhythm: $55 million, RocketLab: $38 million, SangamoTherapeutics: $34 million, LendingClub: $21 million and Payoneer: $20 million.
In his prediction, Hamilton claimed that there could be “dominoes” among the remaining American financial institutions, particularly the local, smaller banks that have succeeded, like SVB.