If there was one problem, as well. In the end, the solution would be simpler. Instead it is not so.
Nowadays, a more or less large sum of headaches becomes a big problem for banks, to such an extent that many of them seriously risk bankruptcy. The confirmation comes directly from a recent creepy report.
Uninsured financial leverage and a large loan portfolio – these are mainly the reasons that caused the collapse of Silicon Valley Bank. A collapse that primarily caused a sensation, but also launched an alert, the echo of which could be reflected in every part of the world.
Indeed, if one compares the situation of the Silicon Valley Bank with other types of banks or companies in the sector, one soon understands that the whole world is a country. The monetary policies set by central banks can have a negative impact on long-term assets, such as government bonds and mortgageswhich in turn can cause losses for banks.
The collapse of bank assets
The creepy report explains that a bank is considered insolvent if the market-to-market value of its assets – after paying off all uninsured depositors – is not sufficient to repay the insured deposits. The recent increase in interest rateswhich has plunged the market value of US banking system assets by $2 trillion, coupled with the high percentage of uninsured deposits at some US banks, threatens the stability of an entire industry, not just the US.
This is why the collapse of Silicon Valley Bank must be considered as an example for Italy and the rest of the world. The recent decline in bank asset values has significantly increased the fragility of the US banking system in the face of potential bank runs by uninsured depositors.
An interventionist solution could be that of intervene to protect depositors of SVB and Signature Bank. At least that’s what Joe Biden intends to do. The president of the United States assured that there will be no impact on taxpayers: “Thanks to the actions taken in recent days to protect depositors of Silicon Valley Bank and Signature Bank – posted the number one in the US on Twitter – the American people can be sure that our system is secure. Citizens’ deposits will be available when they need them, at no cost to taxpayers.” Words are comforting, but nearly 190 banks operating in the US are at risk of failure.
