A real wind of panic crossed the United States. On the other side of the Atlantic, the images of the endless queues in front of ticket machines have gone around the world. In less than 48 hours, the 16th largest bank in the United States, Silicon Valley Bank (SVB), collapsed.
This regional bank was known to be that of many startups and technology companies. But how could the situation deteriorate so quickly?
“It all started with a spark: a series of clients who had heard that SVB had just missed a capital increase of ‘only’ 2.2 billion dollars following the emergency sale, a few days earlier, of a very large amount of its bonds,” explains Karl Toussaint du Wast, founder of NetInvestissement and wealth management advisor, in a forum.
The customers of the establishment were then panicked. “They say, ‘If my bank sells so many bonds all at once and then it’s not able to raise two billion in the markets to balance its books… It doesn’t bode well’ “, says the expert.
Faced with this situation, many of them considered that they had no other choice but to urgently withdraw the funds from their account. However, with customers being largely businesses, no less than $42 billion in withdrawals were requested in just a few hours.
Unable to respond to these requests, SVB then found itself faced with the nightmare of all banks, in “bank run” or liquidity crisis. The establishment then found itself bankrupt. But could this situation have repercussions in France?
“The SVB remains a regional bank despite everything. It has no capital, commercial or economic link with French or European banks”, explains Karl Toussaint du Wast to Planet.
However, he specifies that the psychological parameter is very important in the field of finance. “If I’m a customer of another regional bank in the United States, with the context, I might think that if Silicon Valley Bank filed for bankruptcy, my bank might not be immune'” . Customers of these banks could then be tempted to withdraw their money and deposit it in a larger, more solid bank, he explains.
If there is, for the moment, no reason to worry about the repercussions on France, the expert specifies however that it could be wise to follow the situation of Credit Suisse closely. This indeed collapsed on the stock market on Wednesday March 15, 2023, affected by concerns hovering over the banking sector. Unlike the SVB, Credit Suisse is “a systemic bank which has interconnections all over Europe”, specifies the founder of NetInvestissement.
If a similar situation were to occur in France, what guarantee could protect French savings?
In the United States, there is a guarantee fund to cover customer deposits up to 250,000 dollars per person. In France, this amounts to 100,000 euros. Concretely, this means that “if tomorrow I have 99,000 euros in cash at BNP Paribas and it goes bankrupt, I am protected and I could recover it. The guarantee fund covers deposits in the event of the bankruptcy of the banking institution”, explains Karl Toussaint du Wast.
However, he also clarified that such a situation is unlikely in France. Indeed, unlike the United States, France has only large banks and no regional establishment. “The European Central Bank would never let one of these banks file for bankruptcy,” concludes the expert.
