The collapse of Silicon Valley Bank in the United States was taken over by the government, which is regarded as the biggest banking crisis since the financial tsunami.

(Associated Press)

[Reporter Xu Ziling/Taipei Report] Silicon Valley Bank (SVB), the 16th largest bank in the United States and mainly serving start-up companies, closed down last week and was taken over by the government. It is regarded as the biggest banking crisis after the financial tsunami. The Treasury Department and the Federal Reserve announced a series of measures to stabilize the banking system.

Taiwanese scholars believe that the U.S. authorities are now highly concerned about the banking industry, and there will be no systemic risks, and no obvious impact on Taiwan has yet been seen.

Why are Silicon Valley banks in crisis?

Sun Mingde, director of the Business Climate Forecasting Center of the Taiwan Institute of Economics, said that in recent years, the low interest rate environment in the United States has led to a flood of funds, coupled with the fact that during the epidemic period, loans and investment opportunities have decreased. To buy long-term U.S. Treasury bonds or real estate mortgage-backed securities (MBS), exchange zero-cost funds for financial assets with an interest rate of about 1-2%. This type of asset allocation is originally no problem.

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However, the Federal Reserve (Fed) began to raise interest rates sharply last year, and U.S. bonds and MBS also plummeted. As a result, the interest earned by Silicon Valley Bank was not enough to cover asset losses. SVB was forced to sell bonds at a loss, and investors also sold stocks. SVB's stock price plummeted before it had time to increase its capital with cash. Finally, the regulator announced the closure of the bank.

Qiu Junrong, a professor at the Department of Economics of Central University, analyzed that the long-term reason is that SVB has poor asset management and insufficient funds, and the short-term reason is that new start-ups in Silicon Valley, facing economic headwinds, have difficulty raising funds and can only rely on deposits to survive, leading to a run on storm.

There are many banks buying U.S. bonds. Why did only Silicon Valley Bank fail?

Qiu Junrong said that other banks will use their assets in multiple and flexible ways. Silicon Valley Bank lacks multiple sources of funds, relatively small profits, and the emergence of withdrawals, so it is difficult to sustain.

How will it affect the pace of U.S. interest rate hikes?

Sun Mingde said, "Not only Silicon Valley Bank, but also other large financial institutions in the United States and central banks of various countries have a lot of public debt in their hands. These are unrealized losses. Therefore, if the United States continues to raise interest rates, similar problems will emerge one after another." He expects , the probability of raising interest rates in the United States will decrease, or even suspend raising interest rates.

Qiu Junrong also agreed that the Fed will adopt a relatively loose attitude in March, but he reminded the public that it should not be assumed that the Fed will take dovish measures in this regard. In the future, if such risks are reduced, the basis for the Fed to raise interest rates will still return to the price side.

A repeat of the Lehman Brothers crisis?

Sun Mingde said that when the Lehman Brothers crisis occurred in 2008, the U.S. government did not act immediately, which caused a financial tsunami. Therefore, the U.S. Federal Reserve is now very cautious about such financial risks. Within a week, two banks have failed (SVB and Encryption-friendly bank Silvergate Bank), the authorities are highly concerned about the banking industry, "rescue one family if there is an accident", so as not to cause systemic financial risks.

However, he believes that we still need to pay attention to the follow-up. "This kind of thing is hard to say. Who would have known before last week that a well-known bank in the United States would go bankrupt?"

Qiu Junrong pointed out that fortunately, SVB's business scope is not extensive, and it mainly focuses on the start-up circle in Silicon Valley. The outside world was worried about the follow-up development, but the United States has provided a 100% deposit guarantee, and at the same time coached small and medium-sized banks, which has the effect of stabilizing the confidence of the financial market.

He expressed optimistically that the U.S. financial system has been tempered and improved by many events. After the Internet bubble and the financial tsunami, the financial system has been corrected and become more resilient. This incident will also inspire other banks to think about how to carry out better Management is not a bad thing in the long run.

Impact on Taiwan?

Zhu Zemin, Chief Comptroller of the Executive Yuan pointed out that Taiwan's financial industry has very little exposure, with only life insurance and investment credit industries at about 486 million yuan.

Sun Mingde said that because Taiwan's exposure is low and the stock market has not fluctuated much, there is currently no obvious impact.

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