1 - Why is Silicon Valley Bank bankrupt?
Rising interest rates precipitated the bankruptcy of SVB.
The Californian bank had a
“large part of its short-term commitments, in the form of deposits, and a very high proportion of its long-term and fixed-rate assets”
, explains Éric Dor, director of economic studies at the Ieseg School. of Management.
This made it
"very highly exposed"
to interest rate risk.
"As soon as the rates started to rise, SVB had to better remunerate its deposits and its interest charges rose sharply
," adds the expert.
The rise in interest rates also led to a depreciation in the market value of public bonds issued by the United States and held by SVB.
As long as the bank keeps them, the loss is certainly potential.
“But the bank is still weakened, because the markets are aware that if it needed cash and was forced to sell these bonds before their maturity, it would record a large loss”, decrypts
Éric…
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