Ripple Effect of SVB’s Collapse Expected To Impact World Markets

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Startup-focused lending bank Silicon Valley Bank (SVB) collapsed just recently. Many experts consider this the biggest bank failure since the 2008 financial crisis. The sixteenth largest US bank collapsed due to several factors shaping today’s economy. The bank’s demise may cause ripple effects on the world markets.

SVB was highly affected by the global economic crisis. The rising interest rates to combat inflation caused the bank’s bond prices to plummet. The bank decided to liquidate its assets due to clients’ pressure to cash out since the tech startup industry has been rapidly shrinking.

The bank was forced to close shop as the federal government stepped in. As the bank collapsed in just 48 hours, its effects began to ripple in the global markets. According to News Nation correspondent Joe Khalil, “The collapse seems to be making all mid-sized banks reconsider how they lend money to clients, or whether mid-sized, regional banks could share the same fate.”

Khalil also noted the opinion of Treasury Secretary Janet Yellen, “What I do want to do is emphasize that the American banking system is safe and well-capitalized. It’s resilient. I’ve been working all weekend with our bank regulators to design policies to address this situation.”

However, many experts and investors have seen that the bank’s collapse has already sent global shockwaves. According to Michael Purves, chief executive for Tallbacken Capital Advisors in New York, “what investors have to expect coming into tomorrow and beyond is that we are going to be dealing with a lot of event risk.”

Others believe that SVB’s demise will have long-term effects on the tech landscape for many years. Pooja Kumra, a senior European and UK rates strategist at TD Securities in London, said they foresee a ‘rough ride’ ahead. Moreover, Chinese tech startups and funds went dry in Asia since the bank heavily funds them.

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