US Banking Crisis: Two Top Banks crumble in 48 Hours

US Banking Crisis: Two Top Banks crumble in 48 Hours

The banking sector gets distressed as Signature Follows SVB in Sudden Collapse in the United States.

America is going through a big banking crisis these days causing a lot of investors’ money to suffer. On the 10th of March, America’s biggest, Silicon Valley Bank collapsed and now there is dark news circulating in the media that Signature Banks has become one of these. About $4.5 Billion of investor’s money is being hit worldwide. US Federal authority seized all the remaining wealth of both banks.

What led to the collapse of these US Banks?

As per the Report, Usually, the bank’s closure can be attributed to loan defaults but In these cases, the banks get collapsed due to Interest rate risks and Liquidity risks. Interest Rates in the US have reached their peak point in the past 4 decades. The American Federal Reserve has increased interest rates potentially to control inflation in the last year. These rates are highest in the last 15 years and at present, are stable at 4.5%. 

Silicon Valley Bank (SVB) invested up to 75% of the fund in US Government Bonds. As a result of the decline in interest rates, SVB suffered significant financial losses and ultimately went bankrupt.

US Banking Crisis: Two Top Banks crumble in 48 Hours
Source: Hindustan Times

 Amidst concerns and apprehension among depositors, they have withdrawn a substantial sum of approximately $10 Billion from their accounts. To meet its financial obligations, the bank decided to sell its securities portfolio valued at about $21 Billion with a loss of $1.8 Billion. Both were the US Start-up’s favourite banks though.

What makes Indian banks more secure compared to their global counterparts?

  • Not only the Rules and Regulations in the Indian Banking sector are vast and very strict but also occupied and transparent. 
  • There are some financial obligations which banks cannot cut across.
  • The majority of foreign banks prioritize digitizing their cash flow, while Indian banks tend to have a significant portion of their funds in physical cash form.

The state of Indian start-ups is currently dire.

According to a Tracxn report, Silicon Valley Bank has an investment in several Indian Start-up companies. There are more than 20 Indian start-ups in where SVB has invested their funds. Paytm, Loyalty Rewardz, Bluestone, carvel, Paytm mall, etc are one of the banks where SVB invested.  

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