https://sputnikglobe.com/20230311/silicon-valley-bank-collapse-not-systemic-issue-unlikely-to-lead-to-crisis-1108300601.html
Silicon Valley Bank Collapse Not Systemic Issue, Unlikely to Lead to Crisis
Silicon Valley Bank Collapse Not Systemic Issue, Unlikely to Lead to Crisis
Sputnik International
The collapse of the Silicon Valley Bank, which likely stemmed from a bank run, is not indicative of a systemic banking problem and is unlikely to lead to a crisis similar to the one in 2008, Gary Korolev told Sputnik.
2023-03-11T23:00+0000
2023-03-11T23:00+0000
2023-03-13T09:25+0000
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"This bank run is not likely to cause a systemic crisis given that the Fed now has a plan for such liquidations runs post great financial crisis in 2008," Korolev said, adding that "JPM stock was up on the news, which means that at least at this time the market feels that it is not a systemic banking issue." When asked whether the Silicon Valley Bank can be the beginning of the 2008 crisis, Korolev said that he did not "see this as likely" given the regulators "are always fighting the last war, so to speak, and have tools in place to step in and stop any big banking crisis, which they did not in 2008." "Those tools had to be created over time and now are always on standby," he said. Silicon Valley Bank failed on Friday morning and was taken over by the regulators. SVB was the country's 18th largest bank with $212 billion in deposits, and there was no real solvency issue with the bank until big depositors started pulling money en masse, the expert pointed out. "At least at this point this bank run seems isolated despite Silvergate bank recent issues as well," he said. SVB is the US second biggest banking failure in history after Washington Mutual during the great financial crisis, according to Korolev. "This in itself is not that big of a deal given the Fed is ready to step down, however, what is a big deal for the economy is how integrated this bank was into the lives of many Silicon Valley founders in terms of loans and other financial services as well as mortgages," he explained. When asked what can be expected to happen next, Korolev said that "there has been an increase in chance of the Fed lowering the rates faster, however persistent inflation is not letting them do so." "A bank run like this, of course, increases the chances of the Fed injecting liquidity sooner than otherwise planned. However, as I stated earlier, this bank failure still seems isolated at least to the Silicon Valley tech associated sector of the banking system (SVB, SI) and not the banking sector as a whole," the expert said. Korolev believes that the regulators are doing everything correctly in this situation and most likely were aware that it was going to happen. US Council of Economic Advisers Chair Cecilia Rouse told reporters on Friday that US Treasury Secretary Janet Yellen was closely monitoring the situation concerning the Silicon Valley Bank after its failure. Also on Friday, the Treasury Department announced that Yellen convened the leaders of the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to discuss developments concerning the SVB. Yellen expressed full confidence in banking regulators to take appropriate actions in response to the situation, the Treasury Department said.
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Silicon Valley Bank Collapse Not Systemic Issue, Unlikely to Lead to Crisis
23:00 GMT 11.03.2023 (Updated: 09:25 GMT 13.03.2023) WASHINGTON (Sputnik) - The collapse of the Silicon Valley Bank, which likely stemmed from a bank run, is not indicative of a systemic banking problem and is unlikely to lead to a crisis similar to the one in 2008, Gary Korolev, CEO of Sovereign Wealth Management, told Sputnik.
"This bank run is not likely to cause a systemic crisis given that the Fed now has a plan for such liquidations runs post great financial crisis in 2008," Korolev said, adding that "JPM stock was up on the news, which means that at least at this time the market feels that it is not a systemic banking issue."
When asked whether the Silicon Valley Bank can be the beginning of the 2008 crisis, Korolev said that he did not "see this as likely" given the regulators "are always fighting the last war, so to speak, and have tools in place to step in and stop any big banking crisis, which they did not in 2008."
"Those tools had to be created over time and now are always on standby," he said.
Silicon Valley Bank failed on Friday morning and was taken over by the regulators.
"The bank's liquidation seems to have resulted from a run on the bank by the trader from above, by which I mean several prominent Silicon Valley venture capitalists, including Peter Thiel, [who] advised their startups to pull their money from the bank," Korolev said. "Y Combinator [startup accelerator] did the same," he added.
SVB was the country's 18th largest bank with $212 billion in deposits, and there was no real solvency issue with the bank until big depositors started pulling money en masse, the expert pointed out.
"At least at this point this bank run seems isolated despite Silvergate bank recent issues as well," he said.
SVB is the US second biggest banking failure in history after Washington Mutual during the great financial crisis, according to Korolev.
"This in itself is not that big of a deal given the Fed is ready to step down, however, what is a big deal for the economy is how integrated this bank was into the lives of many Silicon Valley founders in terms of loans and other financial services as well as mortgages," he explained.
When asked what can be expected to happen next, Korolev said that "there has been an increase in chance of the Fed lowering the rates faster, however persistent inflation is not letting them do so."
"A bank run like this, of course, increases the chances of the Fed injecting liquidity sooner than otherwise planned. However, as I stated earlier, this bank failure still seems isolated at least to the Silicon Valley tech associated sector of the banking system (SVB, SI) and not the banking sector as a whole," the expert said.
"Rather than a systemic banking crisis like 2008, this has a feel of a coordinated effort to take down any bank dealing with Crypto while enabling the biggest fish in the banking sector like JPM to feed [on] the smaller fish like SVB," he added.
Korolev believes that the regulators are doing everything correctly in this situation and most likely were aware that it was going to happen.
US Council of Economic Advisers Chair Cecilia Rouse told reporters on Friday that US Treasury Secretary Janet Yellen was closely monitoring the situation concerning the Silicon Valley Bank after its failure.
Also on Friday, the Treasury Department announced that Yellen convened the leaders of the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to discuss developments concerning the SVB.
Yellen expressed full confidence in banking regulators to take appropriate actions in response to the situation, the Treasury Department said.
