A central bank like the federal reserve in the united states can help banks survive a bank run by2/13/2024 ![]() ![]() With interest rates close to zero for several years, corporate treasurers saw no gains from investing in money market instruments rather than deposits. The massive inflows consisted mostly of large uninsured corporate deposits. ![]() ![]() On 31 March 2022, 27 months later, the bank’s disclosures included $198 billion in deposits, $68 billion in loans, and $127 billion in securities. On 31 December 2019, SVB’s financials showed $62 billion in deposits, $33 billion in loans, and $29 billion in securities. SVB is an extreme example, but the difficulties of SVB suggest lessons about other banks in the US and elsewhere. The crisis in US banking is ‘systemic’, concerning a large part of the banking system not because banks are so interconnected but because they have followed similar strategies and are now in a similar bind. Markets have not accepted the view he expressed. Powell’s statement suggests that either he did not understand the nature and the extent of the problems afflicting US banks or that he understood but chose to ignore them. Editors' note: This column is part of the Vox debate on " Lessons from Recent Stress in the Financial System"Īt a press conference on, Jay Powell, the Federal Reserve Chair, suggested that “the resolution and sale of First Republic … is an important step toward drawing a line under (the) period of severe stress” that started with Silicon Valley Bank (SVB)’s 10 March failure. ![]()
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