Explained: After 4 US banks collapse within 11 days, know reason behind financial turmoil in US banking industry© Provided by DNA
The first bank to collapse was Silvergate Capital Corp, the US’s first bank to go down due to the downturn in the crypto industry. The Federal Deposit Insurance Corporation tried to save it, but the bank suffered heavy losses due to department fraud and the collapse of the crypto giant. Depositors are now trying to withdraw money by selling their property, and the bank’s operations were closed on March 8.
Silicon Valley Bank’s investors and depositors were already on edge after Silvergate’s collapse when the company announced plans to sell $2.25 billion of shares on March 8. As soon as the shares were sold, investors started withdrawing their money, and the bank’s shares fell by about 70 per cent. FDI has taken over the bank and has invited bids for it.
Credit Suisse Group AG fell on Sunday after Swiss authorities struck a deal with UBS Group AG for a $3.2 billion acquisition aimed at averting a wider financial crisis. Following the collapse of the 166-year-old Swiss institution, Chief Executive Officer Ulrich Körner attempted a massive outreach to customers to save the bank, which saw huge deposits pulled out over the past year.
First Republic Bank also fell prey to the withdrawal of large numbers of customers’ money. The bank’s cash flow has been estimated at $89 billion, and $30 billion in cash was given to save it, but its shares are still falling.
Regulators have been taking steps to prevent further damage to the banking sector. The US government has stated that people’s deposits will not be affected by the crisis, and the FDI has been appointed as the receiver for several of the collapsed banks. However, many experts believe that the crisis could spread further.