What happened with SVB and could it impact the broader banking sector?
Rising interest rates, which actually fuelled a rally in banking stocks recently, negatively hit SVB because many customers withdrew their deposits. They either needed the cash or wanted to invest it elsewhere to seek higher yields.This forced SVB to sell some of its own securities to preserve its liquidity. The problem is, rising rates have hit the value of many of those securities, and the bank had to sell them at a loss.
One point that has impacted the wider banking sector is that SVB is not unique in recording losses on such securities. The risk to other banks could be if depositors withdraw their money on a large scale, forcing them to sell their assets at a loss too. But the US authorities have sought to address this issue within their recent package of measures.
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