CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.99% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.99% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Learn To Trade
 
Indicators & Chart Patterns

Deepen your knowledge of technical analysis indicators and hone your skills as a trader.

Find your detailed guides here
Trading Glossary

From beginners to experts, all traders need to know a wide range of technical terms. Let us be your guide.

Learn more
Knowledge Base

No matter your experience level, download our free trading guides and develop your skills.

Learn more
Learn To Trade

Trade smarter: boost your skills with our training resources.

Create a live account
Market Analysis
 
Market News

All the latest market news, with regular insights and analysis from our in-house experts

Learn more
Economic Calendar

Make sure you are ahead of every market move with our constantly updated economic calendar.

Learn more
Technical Analysis

Harness past market data to forecast price direction and anticipate market moves.

Learn more
Live Webinars

Boost your knowledge with our live, interactive webinars delivered by industry experts.

Register now
Special Reports

Engaging, in-depth macroeconomic analysis and expert educational content from our in-house analysts

Learn more
Market Analysis

Harness the market intelligence you need to build your trading strategies.

Create a live account
Partnership
 
Affiliate Programme

Grow your business and get rewarded. Find out more about our Affiliate Programme today.

Learn more
Introducing Broker

ThinkMarkets ensures high levels of client satisfaction with high client retention and conversion rates.

Learn more
White Label

We supply everything you need to create your own brand in the Forex industry.

Learn more
Regional Representatives

Partner with ThinkMarkets today to access full consulting services, promotional materials and your own budgets.

Learn more
Partnership

Plug into the next-gen platforms and the trades your clients want.

Partner Portal
About ThinkMarkets
 
Sponsorships

Check out our sponsorships with global institutions and athletes, built on shared values of excellence.

Learn more
About Us

Find out more about ThinkMarkets, an established, multi-award winning global broker you can trust.

Learn more
Careers

Discover a range of rewarding career possibilities across the globe

Apply now
Security of Funds

Security of your funds is our number one priority. We safeguard our Client funds in top tier banks.

Learn more
ThinkMarkets News

Keep up to date with our latest company news and announcements

Learn more
Trading Infrastructure

When it comes to the speed we execute your trades, no expense is spared. Find out more.

Learn more
Contact Us

Our multilingual support team is here for you 24/7.

Learn more
About ThinkMarkets

Global presence, local expertise - find out what sets us apart.

Create a live account
Log in Create account

The impact of Silicon Valley Bank's collapse: what's next for the markets?

Lesego Mthombothi Lesego Mthombothi 16/03/2023
  The impact of Silicon Valley Bank's collapse: what's next for the markets?   The impact of Silicon Valley Bank's collapse: what's next for the markets?
The impact of Silicon Valley Bank's collapse: what's next for the markets? Lesego Mthombothi

Global markets have been shaken by the collapse of Silicon Valley Bank (SVB), a US-based financial institution primarily serving the technology, life science, and venture capital industries.   
 

The news of SVB being in hot water sent investors and depositors scrambling for their funds, triggering a 42-billion-dollar bank run. 
 

On 10 March, the California Department of Financial Protection and Innovation shut down Silicon Valley's biggest bank.  
 

Over the weekend, the US government announced that extensive measures are being taken to ensure all depositors receive their funds back. Meanwhile, in the United Kingdom, HSBC acquired SVB's UK division.  
 

On 13 March, Tim Mayopoulos was appointed as the new CEO of SVB. His first order of business was to reassure everyone that the bank would be operational and ready to receive and hold deposits again. He urged venture capital firms and tech customers to help the bank regain stability by entrusting funds back to SVB. Mayopoulos emphasised that depositors will have full access to their money as all new and old deposits are protected by the FDIC.  
 

Read the full recount of SVB’s collapse here
 

How will SVB's collapse affect other markets?  
 

Authorities in the US and Europe are closely monitoring the banking sector as there are already indications of tension with other banks. Trading of First Republic Bank (FRC) and PacWest Bancorp (PACW) shares was suspended on Monday after the prices plunged by 65% and 52%, respectively. Charles Schwab (SCHW) stocks also took a hit, declining by 11.57% on Monday.  
 

In Europe, the Stoxx Europe 600 Banks index, which tracks 42 major EU and UK banks, tumbled by 5.8% on Monday, marking its most substantial decline since March last year. Shares in Credit Suisse, the beleaguered Swiss banking giant, were down by 9%.  
 

SVB is not the only financial institution that has witnessed a significant drop in the value of its investments in government bonds and other assets. By the end of 2022, the FDIC reported that US banks were sitting on USD 620 billion worth of unrealised losses.  
 

What is happening to Signature Bank?  
 

Following SVB, Signature Bank, a New York-based regional bank known for its cryptocurrency lending, suddenly closed on 12 March, making it the third-largest bank failure in US history.  
 

New York Regulators shut down Signature Bank, citing that the bank's continued operations could threaten the financial system's stability.  
 

According to the New York Department of Financial Services, the bank had over USD 110 billion in assets and over USD 88 billion in deposits. Many investors fear a recurrence of the 2007-2008 financial crisis as Signature Bank is the third regional bank to collapse in the last two weeks after Silvergate Bank and SVB. This has put investors on high alert, concerned about widespread financial vulnerability.   
 

Despite Signature Bank's announcement on Thursday of new financial data and limited crypto deposit balances to increase diversification, customers swiftly withdrew their deposits on Friday, causing its stock price to plummet nearly 25%, from USD 87 to USD 70.   
 

Anticipating Signature Bank’s closure, customers moved their deposits to larger, more established banks, such as JPMorgan Chase and Citigroup.
  

Where to from here?  
 

The failure of SVB and Signature Bank could trigger more bank runs with similar lending and liquidity profiles. Despite the actions taken by the Fed and US Treasury, the majority of depositors are still worried. There is also a risk of foreign contagion, further failures in the crypto market, and broader contamination of other financial markets. Worst case scenario, the global economy takes a significant hit.  
 

In addition, the dissolution of SVB could create a hole in the funding market for tech firms, leading to a flight for safety toward traditional banks that are less complex but are less willing to offer customised capital. This could also lead banks and firms to sell assets at a loss to shore up their balance sheets and remain liquid. The systemic risk exemption granted to the two banks in crisis by the FDIC may also have unknown externalities on the banking structure and governance.   
 

The crisis at SVB has brought private tech investments into the spotlight. For instance, the collapse could subject SoftBank Group Corp's investments to increased scrutiny. SoftBank is a Japanese multinational conglomerate holding company primarily investing in technology, energy, and financial sectors.   
 

Investors are now concerned about the vulnerability of startup firms in SoftBank Vision Funds. SoftBank's shares have declined by 13% in just four sessions, falling below 5,000 yen and approaching a level that could trigger a buyback announcement.   
 

This series of events could have various impacts on the technology industry. It may become more challenging for startups to secure funding and force them to modify their business models.  
 

Signature Bank's failure will likely increase scrutiny of banking regulations, risk management strategies, and partnerships with crypto companies. 
  

The impact on the crypto industry is expected to be short-term, as major cryptocurrencies like Bitcoin and Ethereum have already recovered, indicating increased confidence in independent decentralised assets.  
 

In the short term, the loss of SVB will be felt, but the longer-term impact of its closure will be more severe, as it is a specialised bank with many unique tools, networks, and knowledge. SVB provided opportunities for venture capitalists and entrepreneurs to meet, creating vital webs of human connection. It made quick turnarounds on mortgages, guiding and mentoring founding teams on growing businesses, investing in startups, and supporting the venture capitalists who collaborated with them.  
 

What do you think of the SVB collapse and the subsequent bank failures? Is it time to invest in safe-haven assets, or do you trust that the system will recover in time? 
 

CFD trading presents traders with the opportunity to make the most of any situation. Whether the markets continue to crash, or the banks recover, CFD traders can benefit by going long or short on the stocks, indices, and cryptocurrencies that are affected. 
 

Sign up for an account today!

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

Related articles:

Join the hype around the launch of the new ME...

By Alejandro Zambrano

06/07/2023

Top 5 AI Stocks in 2023

By Carl Capolingua

13/06/2023

US interest rates in balance as traders await...

By Carl Capolingua

10/05/2023

Charts show Banking Crisis echoing GFC meltdown

By Carl Capolingua

04/05/2023

Gold and Silver's time to shine amidst market...

By Carl Capolingua

05/04/2023

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Back to top