‘Bankdemic’ Shaking the World
‘Bankdemic’ Shaking the World
  • Kim Na-hyun
  • 승인 2023.05.31 15:05
  • 댓글 0
이 기사를 공유합니다

(Provided by Unsplash)
(Provided by Unsplash)

  Silicon Valley Bank (SVB), located in California, United States (U.S), went bankrupt on March 10. SVB was the largest commercial bank in Silicon Valley with an asset size of 16th in the U.S. The bank operated for startups in Silicon Valley. It held a large amount of U.S government bonds. Along with the U.S benchmark interest rate, bond rates also rose, significantly reducing the value of government bonds held. At the same time, SVB’s stock price plunged, and startup depositors who saw it made large-scale bank runs.
  The cause of Silicon Valley’s bankruptcy was not just a bank run. The damage was even greater because money could be withdrawn quickly through smart banking. Then, $42 billion was withdrawn in one day on March 9. The incident also led to more than $10 billion in deposits being withdrawn from Signature Bank in the U.S in a single day. Signature Bank also went bankrupt on March 12. The SVB bankruptcy is a major bank shutdown in the U.S since the 2008 financial crisis. As a result, the ‘Bankdemic’ is spreading. ‘Bankdemic’ combines ‘bank’ and ‘pandemic.’ It means that fear spread rapidly around the world in the bankruptcy of banks.
  The impact of the SVB bankruptcy in the U.S is as follows. $10 trillion in deposits were transferred to safer or higher-yielding financial institutions. For up to two weeks, $550 billion has moved from regional to large banks. In a poll conducted about ten days after the SVB bankruptcy, 12% of Americans said they took money out of banks because of it. 18% said they thought about taking out the money. As deposits at small and medium-sized banks have decreased, lending rates have increased, negatively affecting the overall U.S economy. The situation continued until April 26, spreading the bankdemic to First Republic Bank.
  Credit Suisse Bank (CS) in Switzerland also was impacte
d. CS is Europe’s representative investment bank. It has received global investment from state agencies and its assets are three times that of SVB. CS once lost a significant amount of money by investing in fintech companies and financial companies in 2021. There were also several social issues, including charges of allowing drug money laundering in 2022, and convictions. It was losing credibility with the citizens. Up to $10 billion in deposits were withdrawn a day after CS’s financial report was announced to have significant weaknesses following the SVB bankruptcy. UBS Group AG (UBS), the largest bank in Switzerland, avoided the crisis by acquiring CS.
  Following CS, rumors of a crisis have also emerged at Deutsche Bank AG in Germany. In the process of UBS acquiring CS, bond instability grew, sparking rumors of a crisis. It is predicted that it will not be the second CS in the financial market. “European banks’ finances are relatively healthy. However, the psychological transmission of anxiety is a big problem,” said the head of the German Financial Services Agency.
  In the case of Korea, it is difficult to find a bankdemic caused by bonds. The asset and debt structure of financial institutions is different from SVB. In addition, the proportion of bonds among total assets is small. The proportion of bonds in general and savings banks in Korea is 18.1% and 4.8%, respectively. SVB was 56.7%.
  The impact of the SVB bankruptcy will be limited, the Bank of Korea (BOK) said. However, bank runs through smart banking needs to be careful. To prevent bank runs, the anxiety that may lose people’s deposits must be losing their deposits. In Korea, deposits are protected up to 50 million won, including interest on the principal per financial institution per person. This applies to limited financial institutions. There is also a function that the central bank lends emergency funds, in case of financial institutions that are difficult to give deposits.

삭제한 댓글은 다시 복구할 수 없습니다.
그래도 삭제하시겠습니까?
댓글 0
계정을 선택하시면 로그인·계정인증을 통해
댓글을 남기실 수 있습니다.