A full banking crisis isn’t apparent in the SVB wreckage

By Paul J. Davies

13 Mar 2023 · 4 min read

Editor's Note

This isn't another crisis for the entire financial system, argues Bloomberg's Paul J. Davies. SVB was different from other U.S. banks, and the risk of contagion in Europe is low, he writes.

The market still appears to be hunting for weakness among some smaller U.S. banks and even across Europe after U.S. authorities stepped in to guarantee deposits at Silicon Valley Bank. This makes little sense: There should be no snowballing of runs on banks. But profit expectations could be trimmed at many firms, which could justify some - but far from all - of the price declines.

The Federal Reserve brought out its bazooka Sunday, guaranteeing funds for any bank whose depositors might have been clicking "withdraw" over the weekend. The central bank saw clear potential for a systemic crisis in the closures of SVB and Signature Bank and acted to kill it before it got started.

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