Sudden Collapse of Another US Bank

wizzlesticks on 10/03/2023 - 18:31
Last edited 11/03/2023 - 09:42

Silvergate Capital, which was an up-and-coming US bank, has suddenly collapsed after customers started rapidly withdrawing their funds in a panic (deposit runs). Bloomberg published an article today which discussed this, along with another, Silicon Valley Bank, that was teetering on the edge of collapse, and has done a rushed capital raise to prevent the same type of demise as Silvergate.

Are we seeing the start of the next crisis?

For those not paying attention, it had a ripple effect and banking stocks globally have been pummelled. Today was not a good day for the ASX, but especially the banking sector. Although the major banks are considered very safe, there could be more deposit runs, meaning others start panicking and taking their cash out of the lesser-known banks and parking their money elsewhere.

Interested in the thoughts and opinions of the community, as there are a lot of money hoarders here!

EDIT: Silicon Valley Bank also collapsed overnight in Friday trading.

Financial

Comments

    • mooodeng on 12/03/2023 - 10:55

      Bring it on baby

  • xdigger on 11/03/2023 - 15:01

    Is this the beginning of the end of the USD? Time to buy Euro or yuan?

    • Baysew on 11/03/2023 - 15:30
      +1

      The USD appreciated in the GFC.

  • Worf on 11/03/2023 - 15:47

    Any thoughts on how SVB is going to affect the XJO or local bank stocks?

    I think the contagion will be limited, but I’m interested in learning more.

    • wizzlesticks on 11/03/2023 - 16:42

      "… US bank stocks had come under pressure after KeyCorp warned about mounting pressure to reward savers: As interest rates rise, depositors can switch to banks offering higher rates. Analysts say that pressure hits regional banks hardest. They can either raise their own rates, cutting into profits, or face the prospect of a scramble to shore up their funding base if depositors leave."

      This comment is so on point. As we've seen on front page of OzBargain many times, we have many regional and smaller banks offering the highest rates for deposits.

  • Chewy2221 on 11/03/2023 - 17:05
    +1

    In response to the GFC in 2008, the Australian government guaranteed deposits of up to $250,000 in Australian financial institutions. Since 2008, the government has paid out $0, nil , zilch, zero under this guarantee. Our banks are well regulated. The same cannot be said for US banks. I know where I will be invested my hard earned , and it won't be in USA.

    • Worf on 11/03/2023 - 17:48

      Yep, we have a similar financial claim scheme (FCS) for authorised deposit-taking institutions (ADI).

      I was watching a CBA AGM webcast a while ago, they said their reserves exceed CET1 requirements and there was ‘unquestionable strength’ in the bank. I’m unsure what’s spin and what’s real.

    • Mistredo on 11/03/2023 - 19:50
      +1

      The problem is companies hold money in banks for payrolls, and 250k will not cut it for most companies.

    • Korban Dallas on 12/03/2023 - 02:59

      Except for Bano. Seem to get away with a lot.

      Like what bank doesn't have a phone number and lousy customer service?

    • SolitaryMan on 13/03/2023 - 21:20

      Rubbish, many US banks are subject to Basel III.

  • congo on 11/03/2023 - 20:55
    +1

    Since bitcoin has now just plunged (again), does this mean we will be getting better GPU prices?
    Maybe something good under $1K ?

    • mitchalbrown on 13/03/2023 - 08:22

      those GPU prices should have come down a long time ago… nvidia started making all their gaming cards Low Hash Rate(LHR) so that they would be useless for mining and only good for gaming. As a result they were able to replensih their inventory.
      Ethereum moving to proof of stake also resuced the demand for GPU's.

    • SolitaryMan on 13/03/2023 - 21:20

      This is the real issue and question!!

    • down-under on 12/03/2023 - 08:59
      +1

      It's a shorter weekend. They lose an hour this weekend due to daylight savings

    • tikeyike on 12/03/2023 - 10:06

      What's wrong with ANZ bank compared to the other Big 4 banks?

        • MarsTitan on 12/03/2023 - 14:07

          Complete BS.

    • SolitaryMan on 13/03/2023 - 21:21

      USD collapse likely on what basis? To be replaced by which currency as the global reserve currency? The only FUD is in your own comments.

  • ALesha77 on 11/03/2023 - 22:06

    Silvergate had to mark to market their book which was full of long duration bonds (they have done all the right things) and their book took a hit due to interest rates rising fast.
    The reason they had to mark to market - run on the bank and their customer were not usual mum-dad but silicon valley start-ups with huge cash balances.

    Next week might be eventful or not depending on the FED.
    AU smaller shadowy lenders might start falling as well should there be any kind of capital pull.

    And BTW, the collapse was not so sudden given that there were some very active short sellers in that stock .

  • Poor Ass on 12/03/2023 - 02:49
    +2

    and…… It's gone

  • relentless on 12/03/2023 - 07:36

    diversify your bonds.

  • down-under on 12/03/2023 - 08:56
    +3

    Had a look at my account, the $50 life saving is still there, I'm good.

  • frewer on 12/03/2023 - 11:19
    -5

    XJO doesnt looks good either https://www.tradingview.com/x/GawiX2me/, there are USD $80-$100triliion of debt gonna be 'settle' soon https://www.youtube.com/watch?v=fLGMxH9KFa8. War & rumour of war with Chyna this time. There're reasons why Viet Nam is Chyna 2.0, I guess sleazy Albo visit India to 'moves' the production away from Chyna as well.

    Globally, we're in recession even big tech fired people left & right ( Microsoft, Twitter, Amazon ect ). In AU Scott went into receivership & they have $6billions worth of goods potentially goes spoils … $6billions. There are many many stories likes this. EU even worse than us … Did I mention the death of 1000s cuts by rate hikes ? Poverty is a slow painful death.

    "Pray that your flight will not occur in the winter or on the Sabbath" or prep for Apocalypse :)

    • MrThing on 12/03/2023 - 15:33

      Doomsayer

  • ivyholmes on 12/03/2023 - 11:19
    -4

    By any chance that Australian banks will be collapsed too from recession? Will we also lose money if we have money below above 250k in a bank or below?

  • CowFrogHorse on 12/03/2023 - 11:57
    +3

    The bank didnt collapse the CEO still got his millions. Talk about priorities people.

    • cunningdrew on 12/03/2023 - 13:58

      Correct. All of the key C suite players at SVB liquidated a fair portion of their position in the past week or two.

      • meowsers on 13/03/2023 - 12:06
        +1

        These were done through a 10b5-1 which is essentially a predefined plan to prevent the appearance of insider trading. There's plenty of issues with them though.

  • cunningdrew on 12/03/2023 - 13:57
    -1

    Centralized banking wants to play in crypto yet is not willing to secure their positions. It's so obvious a grade schooler could work it out. They need to live and operate from the margin, not the pot. It's unbelievable.

    The short of it? As a consumer if you want to play in crypto, don't let these organisations build their business on your stack. Only use, and I mean ONLY…. non-custodial. This is where you purchase an asset and it sits in your secure wallet.

    If you purchase custodial, think Coinbase, Coinspot etc…. you're basically investing in their business as you don't own the asset you purchased directly. It's sitting on their Saas platform and you have a promise note that you can access said asset so long as the organisation is healthy.

    Crypto is not the problem here, it's banking who have seen a gap to take assets and not secure them. Great until a bank run occurs.

  • rave75 on 12/03/2023 - 14:06

    Cfo from Lehman brothers works at Silvergate. No wonder! History repeats itself.

  • Tasmaniac on 13/03/2023 - 03:46

    Thanks God banks are required to keep 10% of all deposits just in case this happens.
    If banks had their way, and they nearly did, they wouldn't be required to keep anything in reserve at all.

    • ssfps on 13/03/2023 - 23:28

      Fractional reserve banking is the root of almost all evil in banking. They should be held to 100% - but they've been chipping away for a long time.

  • lostgoat on 13/03/2023 - 10:00

    Reports another US bank is in trouble . Panick merchants please sell on ASX opening ,

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