From Moody's downgraded outlook to crashing oil prices, know top 10 updates of SVB collapse
3 min read 15 Mar 2023, 07:01 AM ISTAmid the fears of a fresh financial crisis erupted due to the Silicon Valley Bank crisis, the Moody's Investors revised its outlook on he US banking system to ‘negative’ from ‘stable’ on Tuesday. Know latest updates about the SVB here
PremiumThe revised outlook of Moody's Investors on the US banking system to ‘negative’ from ‘stable’ has further increased the market chaos that emerged as the after-effect of Silicon Valley Bank's collapse in the economy. The reversed outlook has further heightened the risk of contagion. From crashing global oil prices to falling currencies, the bank runs at Silicon Valley Bank, Silvergate Capital Corp, and Signature Bank have begun a cycle of reactions in the economy. The US banking sector is struggling to regain confidence in the industry.
Read all SVB crisis related updates here
According to the rating agency, the US banking sector environment has deteriorated enough of the ongoing turmoil that it is now battling a crisis of confidence, both from investors and depositors. Know about the major updates of the worst banking crisis since 2008.
All you need to know about the Silicon Valley Bank collapse
-Silicon Valley Bank is a California-based bank that is lending money to tech companies and start-up since 1983. The bank enjoyed heavy investment under the government's easy monetary policy. But the tables turned when countries across the world tightened monetary policy due to high inflation.
-On March 8, SVB said it sold $21 billion of security at a loss of $1.8 billion to ensure liquidity. The bank was also planning to sell $2.2 billion worth of shares. The matter was aggravated when, one of the funds run by leading Venture Capitalist VC Peter Thiel, asked its portfolio companies to take out their money from the bank. The action was followed by other VCs like Union Square Ventures and Coatue Management, etc.
-To avert any other incident of sudden collapse like that of Silicon Valley Bank, the Federal Reserve is planning to come up with tougher rules and oversight for midsize banks similar in size to Silicon Valley Bank. The review of the $209 billion bank's failure has been done by Fed Vice Chair for Supervision, Michael Barr. It could lead to the strengthening of regulation, reported Reuters.
-Moody's downgraded its outlook on the US banking system to negative from stable as a reflection of the "rapid deterioration in the operating environment' Tuesday.
-Moody's put a total of 6 US banks on its review for downgrade list on Monday. The credit rating agency firm downgraded the status of SVB, Western Alliance Bancorp., Intrust Financial Corp., UMB Financial Corp., Zions Bancorp. and Comerica Inc.
-The US government further tightened its scrutiny of the collapsed bank. The US Justice Department has opened a probe into the matter, reported Reuters. In addition to this, the Securities and Exchange Commission launched a parallel investigation into the matter, reported the news agency citing Wall Street Journal. Apollo Global Management Inc, Blackstone Inc, and KKR & Co Inc expressed interest in buying assets of the collapsed Silicon Valley Bank.
Also Read: Lesson from Silicon Valley Bank's failure, Zerodha CEO Nithin Kamath explains
-The tough economic situation and the sound of the crash of US Banks also echoed in global oil markets where oil prices fell about 1% to a five-week low on Tuesday. The market continues to fear a slump in oil demand due to the possibility of a fresh financial crisis. Brent futures were down 51 cents, or 0.6%, to $80.26 a barrel by 11:36 a.m. EDT (1536 GMT), while U.S. West Texas Intermediate (WTI) crude fell 56 cents, or 0.8%, to $74.24.
-Indian Rupee showcased its 5-week worst performance against the dollar on Tuesday. The Indian currency performed poorly mainly due to the fears of contagion from the collapse of Silicon Valley Bank (SVB) weighed on risk sentiment ahead of a key U.S. inflation data.
The rupee ended down 0.44% at 82.49 per dollar, marking its biggest percentage drop since February 6.
-Till Tuesday, the SVB collapse has wiped out a total of $464 billion in the global stock market in two days. According to Bloomberg, the loss widened with the MSCI Asia Pacific Financials Index plummeting by 2.7% to the lowest since Nov. 29. Mitsubishi UFJ Financial Group Inc. slid as much as 8.3% in Japan, while South Korea’s Hana Financial Group Inc. fell 4.7% and Australia’s ANZ Group Holdings Ltd. lost 2.8%.
-British Financial Service company, HSBC Holdings Plc is planning to inject £2 billion ($2.4 billion) of liquidity into the UK division of the Silicon Valley Bank. The move will help in building market confidence by capping a frenzied weekend of talks.
(With agency inputs)
