Wednesday, March 22, 2023

The collapse of Silicon Valley Bank sparks the global financial strait – Usky News



MUMBAI: Silicon Valley Bank, a four-decade-old US lender, fell into receivership of the Federal Deposit Insurance Corporation (FDIC) on Friday after its long-established technology startups’ customer base got worried and deposits piled up. Receivership usually means that one bank’s deposits will be taken over by another, healthy bank or that the FDIC will pay depositors up to an insurance limit of $250,000.
California’s banking regulator will dispose of its assets, moving swiftly to protect depositors as the crisis ripples through global markets and hits banking stocks. The bank had $209 billion in assets and $175 billion in deposits, the FDIC said in a statement.
Liquidity issues at Santa Clara-based SVB came to the fore on Thursday night, after which its share price fell by more than half and another 69% in pre-market trades on Friday. The bank suffered a run after which its stock hit a seven-year low and trading was suspended.
Market data showed that the effects of the troubles at SVB spread quickly around the world, triggering a financial crisis on both sides of the Atlantic and wiping out hundreds of billions of dollars. Investors globally are also crossing their fingers after US Treasury Secretary Janet Yellen indicated on Friday that SVB is not the only lender facing challenges.
The impact of SVB’s trouble was also felt on Dalal Street on Friday. The Sensex fell over 900 points in early trade as investors hit the sell button, but did some lower-level fishing to end 671 points, or 1.1%, lower at 59,135. Like their global counterparts, banking and financial stocks in India too led the decline with the BSE’s Banking Sector and Financial Services indices falling around 1.8% each.
Growing expectations of a 50-basis-point (100bps = 1 percentage point) interest rate hike in the US later this month, which could impact foreign investors’ interest in emerging market stocks, including India, also weighed on investors. Sentiment was negatively impacted, market players said. On the BSE, among Sensex constituents, the top six losers for the day were all from the BFSI sector: HDFC Bank, HDFC Bank, SBI, IndusInd Bank, Axis Bank and Bajaj Finserv.
Meanwhile, retail investors continued to pour money into the stock market through the MF route, while debt fund investors remained cautious as interest rates remained elevated. Monthly inflows through SIPs in February saw a marginal decline as compared to the January figure, but industry participants attributed this to the shorter month. AMFI said that in February, equity mutual fund schemes recorded net inflows of Rs 15,686 crore as compared to Rs 7,303 crore in December 2022.

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