The crisis that hit Silicon Valley Bank (SVB), which was shut down by US authorities on Friday, caused panic across the banking sector, with markets questioning the consequences of the biggest bank failure in the US since the 2008 financial crisis.

The bank is no longer able to meet the huge withdrawals made by its customers for their money, and they are especially active in the field of technology, and its attempts to increase capital quickly did not succeed.

On Friday, the US authorities announced that they had closed the “Silicon Valley Bank”, which is close to the technology community, and that it suddenly found itself in a state of insolvency, and that it entrusted the management of deposits to the Federal Deposit Insurance Corporation in the United States (FDIC).

On Friday, US Treasury Secretary Janet Yellen called several regulators responsible for the financial sector to discuss the situation, stressing that she had "full confidence" in their ability to "take appropriate measures" and that the banking system was "strong and resilient."

The Federal Deposit Insurance Corporation in the United States plans to reopen the bank's 17 branches, which are based in California and Massachusetts, on Monday, and allow customers to withdraw up to $ 250,000 in the short term, which is the amount that is usually guaranteed by the institution.

The Fed stated that the California Financial Protection and Innovation Authority (DFPI) officially took over the bank, citing "insufficient liquidity and insolvency."

At the end of 2022, the bank had assets of $209 billion and deposits of $175.4 billion.

Although little known to the public, Silicon Valley Bank was the 16th largest US bank by assets.
The closure of SVB not only represents the largest bank failure since the closure of Washington Mutual Savings Bank in 2008, but also the second largest retail bank failure in the United States.

In front of the bank's headquarters in Santa Clara on Friday, several customers stood asking how they could withdraw their money. A paper from the DFPI hung on the door stating that they could consider the two of them withdrawing the $250,000.

In the markets, the wave of panic began Thursday after SVB announced that it was seeking to raise capital quickly to cope with the massive withdrawals made by its clients of their funds, in addition to the loss of $ 1.8 billion from the sale of securities.

The announcement surprised investors and revived concerns about the strength of the banking sector as a whole, especially with the rapid rise in interest rates leading to a decline in the value of bonds in their portfolios.

The four largest US banks lost $52 billion on stock exchanges on Thursday, followed by Asian and then European banks.
In Paris, Societe Generale lost 4.49%, BNP Paribas 3.82% and Credit Agricole 2.48%. Elsewhere in Europe, Germany's Deutsche Bank lost 7.35%, Britain's Barclays 4.09% and Swiss UBS 4.53%.

On Wall Street, major banks rebounded on Friday after falling the previous day. Shares of JP Morgan Chase rose 2.3 percent in the middle of trading, while Bank of America and Citigroup approached balance.

On the other hand, local banks such as First Republic and Signature Bank witnessed more strikes, with their shares declining 23% each.

In a note, Christian Parisot of the Oriel BGC brokerage group confirmed that investors "also saw in the bank's difficulties the effect of an inversion of the interest rate curve", that is, when short-term rates are higher than long-term rates.
Banks usually borrow at short-term rates to offer loans at medium or long-term rates.

Another American group faces challenges. The parent company of Silvergate Bank, which operates in cryptocurrencies, announced Wednesday that the institution will be liquidated.

Stephen Innes, an analyst at the "SBI Management" group, said in a note that he wanted to be reassured that the possibility of a "capital or liquidity incident between major banks" is "minimal".

Since the financial crisis of 2008-2009 and the bankruptcy of the American "Lehman Brothers" bank, banks have to provide strong guarantees of the authority to control the national and European markets.

The European Banking Authority is subjecting fifty major banks on the continent to solvency tests.

The results of the last such test at the end of July 2021 revealed that financial institutions are able to withstand a serious economic crisis without serious damage.

For analysts at Morgan Stanley, the “funding pressures facing SVB+ are very special and should not be taken as the norm for other domestic banks”.

"We do not believe that the banking sector is facing a liquidity shortage," they added in a note.