finance news

Global banks face uncertainty as shares decline due to fall of SVB

Global banks face uncertainty as shares decline due to fall of SVB

Financial institutions around the world are facing significant difficulties following the collapse of the Silicon Valley Bank in the U.S. This is in spite of various steps are being taken by governments to normalize the situation and retain confidence in the banking system.

The stock market has not been reassured by the intervention of US President Joe Biden, who sought to build confidence in the strength of the US banking system. Some relief measures are being seen, however, such as HSBC’s decision to buy the UK arm of SVB.

Despite the bank’s fall, its shares were sharply sold off amid uncertainties in the markets worldwide regarding the health of the financial system. Economists are suggesting that these tense conditions could cause leading banks in the world to decrease interest rates, affecting the customers, investors and shareholders of different banks. Prices of government bonds have also surged significantly in the wake of SVB’s collapse, as investors pivot toward safe-haven assets.

POTUS Joe Biden recently reassured the public of regarding the security of their deposits. He further added that the administration would do whatever is needed to help citizens get uninterrupted access to their money.

There was a 60% collapse in the value of First Republic Bank based in California, with similar declines being observed by other lenders including Western Alliance Bancorp and PacWest Bancorp. The debt ratings of the Signature Bank of the U.S., which was also recently closed, by the agency Moody, were also downgraded into junk territory. This was followed by the debt ratings of six other major banks of the U.S being brought under review for a similar downgrade.

The KWB bank index, which represents the biggest banks in America, fell by more than 10%. Despite these risks, Prime Minister of the United Kingdom, Rishi Sunak, has offered reassurance regarding the safety of the banking sector in the nation.

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