Silicon Valley Bank bankruptcy: authorities try to reassure the markets despite the panic

Customers wait outside a branch of Silicon Valley Bank in Wellesley, Massachusetts on March 13, 2022. © Brian Snyder / Reuters

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As financial markets rocked sharply on Monday (March 13) following the collapse of California-based Silicon Valley Bank (SVB), US President Joe Biden and European officials tried to bring the sector back to calm.

They wanted to ensure that there would be no contagion in the global banking sector, while the consequences can go as far as Chinese tech.

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US President Joe Biden made a televised address early Monday morning to

, a sign that the White House takes the bankruptcy of this Californian bank specializing in the Tech industry very seriously, reports our correspondent in Miami,

.

Americans can “

”  banking system 

 , assured the American president.

“ 

 ”: from the White House, he sought to fuel the most precious resource in the markets: confidence, the only bulwark against a large-scale contagion of the troubles of the SVB.

The Head of State assured that he would do “all

”.

The American authorities placed

this establishment close to the technological circles.

It was put up for auction with the aim of

.

They also intervened in haste in the face of the bankruptcy of two smaller establishments, Signature Bank and Silvergate Bank, known for its privileged links with the cryptocurrency community.

On Sunday, the

of all deposits from SVB and allow access to all deposits from Signature Bank.

The Federal Reserve (Fed, US central bank) has agreed to lend the necessary funds to other banks that need them to honor withdrawal requests from their customers.

Joe Biden also said he would ask Congress to legislate to "

" banking regulation, toughened after the Lehman Brothers debacle in 2008. Because this legislation was then lightened by his predecessor Donald Trump.

He promised that American taxpayers would not be taxed, but investors and shareholders would not be " 

 " from the losses incurred.

The authorities want at all costs to avoid a panic in the markets on Monday and mass withdrawals of bank customers, a “

” with potentially devastating effects.

US President Joe Biden spoke very early on Monday to reassure after the bankruptcy of the SVB

David Thomson

“

 No direct contagion 

” in Europe, according to Brussels

On the other side of the Atlantic, European politicians are also trying to provide reassurance about the risk of contagion to the entire banking sector.

“

”, declared in Brussels the European commissioner for the. 'Economics Paolo Gentiloni, before a meeting of Eurozone Finance Ministers.

A spokesman for the Banque de France told AFP that French banks were "not

" to SVB.

[HEADLINE AT 6 p.m.] French banks "are not exposed" to the bankrupt American bank Silicon Valley Bank (SVB), a spokeswoman for the Banque de France told AFP 1/5 pic. twitter.com/8giebEX6iw

— Agence France-Presse (@afpfr) March 13, 2023

Earlier in the day, the French Minister of the Economy Bruno Le Maire came out of the calm to rule out any risk of contagion: “

“, he launched to investors, believing that”

” in the United States and in Europe.

In Germany, the banking supervisor Bafin assured Monday that the bankruptcy of SVB did not constitute "

" of the country.

On the UK side, the government announced that the British branch of SVB had been sold to the British banking giant HSBC, for a symbolic pound.

“

”, assures the British Treasury.

A torrid day for European banks in the wake of the SVB collapse.

French Finance Minister Bruno Le Maire's message to investors: calm down.

“There is no specific concern for French banks,” he told Bloomberg's @MariaTad https://t.co/06bzBhnRO1 pic.twitter.com/VbtYrfbT8l

— Bloomberg TV (@BloombergTV) March 13, 2023

Tossed markets

However, these announcements did not prevent Wall Street from opening lower on Monday morning, before recovering in the morning.

The prices of several regional banks collapsed.

The Californian First Republic fell 60.49% at the end of the morning, losing more than three quarters of its market capitalization since Wednesday.

The European markets remained clearly in the red, but recovered after having lost more than 3% at the start of the afternoon: Paris and Frankfurt fell by 2.35% and 2.50%.

London yielded 1.82% and Milan 3.56%, the largest declines since last summer.

And banking stocks suffered sharp declines.

The debt market, perceived as safe haven investments in the event of a crisis, was also experiencing a turbulent session: certain government securities, in particular the short-term debt of the United States, posted historic declines.

Oil also suffered the blow, with falls of more than 4%.

Investors remain feverish and prices volatile, despite efforts to reassure the American authorities, in order to avoid contagion after the bankruptcy of three American banks.

Fear in the Tech sector as far as China

The sector in China is also worried, as the Californian bank was popular there in biotechnology.

To avoid panic, the Chinese partner of SVB could resume its stake in the Chinese subsidiary of the bank.

Chinese investors multiplied reassuring press releases on Monday concerning their risk of exposure to the American lender, reports our correspondent in Beijing,

.

BeiGene, one of China's largest cancer pharmaceutical companies, claims to have over $175 million in uninsured cash deposits at SVB: 3.9% of its cash and short-term investments, but "

,"

.

The same goes for Zai Lab, this other tumor treatment developer which has offices in Shanghai and San Francisco and $23 million in “

” deposits at SVB, should not be “

” in its operation according to its management.

The tone has visibly changed from Friday morning, when policymakers awoke in China in a panic: Overnight in China on Thursday,

.

Meanwhile, the rescue plan proposed by the US administration on Sunday has calmed the markets.

The subsidiary of the American bank in China could be taken over by its Chinese partner, the Shanghai Pudong Development Bank,

.

Knowing that the fall of the SVB leaves many Chinese start-ups in a financing dead end,

, which recalls that the bankrupt institution indeed served as a bridge for groups operating between China and the United States. United.

SVB: the Paris Stock Exchange sinks into the red, weighed down by the setbacks of American banks https://t.co/Qoykvdpks3

– Les Echos (@LesEchos) March 13, 2023

Memories of 2008 in the minds

The SVB debacle illustrates the disruption of the entire US banking system in the face of Fed monetary tightening.

Interest rate hikes in the United States have encouraged customers to put their money in financial products that pay better than current accounts, drying up a crucial source for the cash-hungry new technology sector.

The recent misadventures of the SVB recall September 13 and 14, 2008. The American authorities had failed to find a buyer for Lehman Brothers and refused to intervene, pushing the bank to file for bankruptcy, with dramatic consequences for the financial sector and the entire world economy.

►Also read: Why the fall of Silicon Valley Bank, the financial arm of tech, is causing so much excitement

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