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The collapse of the SVB bank. Janet Yellen does not anticipate much help, and the British are looking for help in the Middle East

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On Friday, the US bank SVB was declared bankrupt and closed down by the Federal Deposit Insurance Agency. At the end of 2022, the institution had over $209 billion in assets. The situation raises many questions overseas about the security of the banking system, and one of the most important people – US Treasury Secretary Janet Yellen – spoke on the matter.

Treasury Secretary USA Janet Yellen said on Sunday she was working closely with banking regulators to respond to collapse of the Silicon Valley Bank and protect depositors, but said it was not considering major bailouts.

“Let’s be clear, during the financial crisis there were investors and big bank owners who were bailed out… but the reforms that have been made since then mean we won’t do it again,” Yellen told CBS News this morning.

“But we are concerned about depositors and we are focused on trying to meet their needs.”

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The British are looking for an investor in SVB UK

The collapse of the American bank also became a problem for the British. The UK government is now trying to secure a buyer from the Middle East to take over the UK branch of Silicon Valley Bank to prevent damage from spreading to the tech sector, the Financial Times reported on Sunday.

SVB UK had almost £7 billion ($8.42 billion) in deposits when the Bank England declared him insolvent on Friday.

The collapse of SVB, what is it all about?

SVB mainly focused on servicing technology companies. He offered them financial services, such as loans, but mainly collected deposits from them.

As Michał Stajniak, Deputy Director of XTB’s Analyzes Department, points out, the institution was involved in Venture capital projects and invested the surplus in American bonds and MBS – a type of securities secured by mortgage debt (they were one of the causes of the 2008 crisis). ).

“Due to the strong increase in rates and the consequent significant sell-off of debt, there was a significant unrealized loss in the bank’s portfolio and there is nothing unusual about it. In principle, it was something normal in the entire financial sector. However, the specificity of SVB itself comes into play. It is a bank which serves hundreds or even thousands of technology companies or startups. This sector, in turn, has had problems for some time, catching breath after the strong last 2 years. Companies began to slow down, look for savings and reached for the capital accumulated on deposits, “said Stajniak in the comment.

The bank needed to get liquidity after withdrawing deposits and started selling all liquid assets worth more than 20 billion dollars. He did so with a loss of nearly $2 billion.

“That’s quite a lot when it comes to the bank’s balance sheet gap. At the same time, the bank announced an additional share issue to cover this gap, which prompted investors to get rid of the bank’s shares. Yesterday, the shares plunged by up to approx. 70%! These problems may double today before the weekend, so some people began to look for similarities with 2008” – explained Stajniak in a comment posted on XTB’s website on Friday.

Main photo source: PAP/EPA/SARAH YENESEL



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