The impact of the news of the closure of Bank of America is seen on the countries of the world. The banking sector’s benchmark stock index plunged 8.1% after the news. The fall was the biggest one-day fall in the last three years.
First Published Mar 11, 2023, 12:00 PM IST
New Delhi: Silicon Valley Bank created a stir in the US markets last week. America’s largest bank, Silicon Valley Bank, went bankrupt. Silicon Valley Bank (SVB) has been shut down by its regulators. The property was seized after the bank went bankrupt. This information is provided by the Federal Deposit Insurance Corporation (FDIC). America is once again on the brink of a banking crisis after the bank shutdown. Bank of America is once again in dire financial straits.
Impact around the world
The impact of the news of the closure of Bank of America is seen on the countries of the world. The banking sector’s benchmark stock index plunged 8.1% after the news. The fall was the biggest one-day fall in the last three years. This has also affected the Indian stock market. The Indian stock market closed in the red on Friday. After the closure of this Bank of America, there is an uproar everywhere. Due to the bank bankruptcy news, negative sentiment may continue in the markets across the world for the next few days.
Keeping in view the financial situation of the bank, it was decided to close it. The California Department of Financial Protection and Innovation ordered it shut down. At the same time, the FDIC was tasked with protecting the deposits of Silicon Valley bank clients. You will be surprised to know that Silicon Valley Bank is the 16th largest bank in America. It has more than $210 billion in assets. Its branches are spread across many cities in America. You must not be surprised that such a big bank has closed down.
In fact, the condition of the bank continues to deteriorate due to the increase in interest. Silicon Valley Bank provides financing to tech companies and new ventures. About 44 percent of the bank’s business is with tech and healthcare companies. These sectors have been adversely affected by the US Federal Reserve’s continuous hike in interest rates. Investors also lost interest in these sectors, which adversely affected SVB Bank’s business. Companies lent by the bank did not repay the loan, which affected the financial health of the bank.
People are starting to remember 2008 after the closing of Silicon Valley Bank. In the year 2008, America faced its biggest banking crisis due to the banking firm Lehman Brothers. Not only America but the whole world went into the grip of recession. In fact, all banks in America, including Lehman Brothers, issued a lot of loans during that period. Between 2001 and 2006, huge loans were given to American real estate companies. They gave loans without thinking about how they will get back.
At that time the American real estate market was at its peak. Banks also made profits and lent to companies in excess of their assets. But when there was a recession in this sector, the difficulties of the banks increased. Companies started collapsing and bank loans sank. In 2008, Lehman Brothers declared bankruptcy. Later recession started all over the world including America.
Last Updated Mar 11, 2023, 12:04 PM IST