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Modern Bank run ?

Mar 10, 2023

There is some stress amongst investors in the US banking sector: the US index of banking stocks ( KBW Bank Index ) experienced its biggest drop yesterday since June 2020. Hold on a second: the current environment should be good for banks as rising interest rates support net interest margins and the profits for banks. This time the culprit is Silicon Valley Bank, a lender specializing in venture capital. Its share price fell 60% after the surprise announcement it was holding a $2.25 billion share sale following a significant loss on its portfolio, which included US Treasuries and mortgage-backed securities. Some bigger VC Funds are advising their portfolio companies to withdraw their cash from the lender. We do not have a full picture yet of what the specific problems at SVB are, investors however “take a run and ask questions later” approach. Higher interest rates will continue to create headaches in the US banking sector.

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