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An Study on the Causes and Consequences of the SVB Collapse
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An Study on the Causes and Consequences of the SVB Collapse
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Journal Article
An Study on the Causes and Consequences of the SVB Collapse
2024
Overview
This comprehensive study delves into the nuanced causes and repercussions surrounding the failure of Silicon Valley Banks(SVB), scrutinizing both external and internal factors. Internally, the demise is attributed to mismanagement of assets and liabilities, coupled with flaws in the business model. Externally, the Federal Reserve’s interest rate hike and relaxed financial regulations during the Trump era are identified as pivotal triggers. Post-bankruptcy, the rapid acquisition and sale of SVB, First Total Bank, and Signature Bank temporarily alleviate risks within the US banking sector. Regulatory authorities respond by fortifying rules, enhancing industry resilience but simultaneously tightening loan conditions, potentially intensifying economic downturn pressures. Presently, market confidence is on the mend due to regulatory influence, limiting systemic risks. However, the looming 2023 interest rate hike poses a threat, particularly with tight monetary policies. Small and medium-sized US banks, heavily invested in commercial real estate, face heightened vulnerability, potentially precipitating a downward spiral in property prices. Drawing lessons from Lehman Brothers, the study advocates for a balanced approach to monetary policy, emphasizing financial stability, improved risk management by regulators, and ongoing efforts to avert and mitigate future financial crises.
Publisher
EDP Sciences
