Despite the measures taken by US authorities, concerns remain in financial markets after the collapse of two US banks. On Friday, Silicon Valley Bank, which specializes in financing start-ups, was closed and placed under government control after a failed capital raising. US regulatory authorities they then closed another credit institution, Signature Bank, after customers withdrew their money en masse from the bank. In both cases, customer funds were secured, according to a joint statement from the Treasury secretary, the Federal Reserve chairman and the FDIC.

However, uncertainty remains, and investor concerns about how rising interest rates and yields will affect banks are mounting.

What other such cases are there?

Moritz Solarik, professor of economics at the University of Bonn, points out that the “decisive action” of the US. has reduced the risk of further bank failures. “The Treasury Department and the Federal Reserve Bank of the United States they implemented measures over the weekend that should reassure the depositors of these two banks,” Sularik says in an interview with DW.

At the same time, however, the existing problems of the global financial sector should be carefully examined: “Relevant predictions are difficult and the truth is that the causes of the collapse of Silicon Valley Bank and Signature Bank are not limited to these two banks. So the question is: which others are at risk?”

Silicon Valley Bank was forced to sell bonds. Apparently, some start-ups wanted to withdraw capital from the bank, so the institute was forced to liquidate its bonds. But with central banks turning to interest rates, yields rose but bond prices fell. When the bonds are sold, the reduced prices take the form of a loss for the bank. As such, the bank attempted an extraordinary capital increase, which failed.

The fear of the bank run

To prevent a possible domino of developments, the American authorities intervened decisively, stressing that the deposits are safe. The nightmare of banking and financial supervisory authorities is the so-called bank run. In this process, customers essentially flock to banks to withdraw their savings to a safe place. If a large number of customers do this at the same time, the banks do not have enough funds available to service all the demands and effectively dry up, causing mutual trust to disappear. The consequences of this phenomenon were seen during the global crisis of 2008, when the financial sector was on the verge of “collapse”.

However, the Center for European Economic Research does not expect a new global financial crisis after the closure of the two American banks. “SVB’s business model, as a start-up financier, is very special,” says Friedrich Heinemann, head of research for corporate taxation and public finance. “From this point of view, I do not expect an escalation to the proportions of a financial crisis.”

“No impact on the German financial system”

The Association of German Banks also states that German banks are “strong, stable and resilient”. After the banking and financial crisis of 2008, German institutions massively increased their capital. “There is no impact on the German banking system due to the collapse of the bank. Nor was there any question about the German deposit guarantee,” said a representative of the association.

Unlike ECB banking supervisors, who had not initially scheduled an emergency meeting, the Bundesbank’s crisis team met on Monday to discuss the potential impact on the German financial sector. Germany’s financial services regulator (BaFin) has imposed a moratorium on Silicon Valley Bank’s German branch, i.e. a ban on sales and payments. In its announcement, the supervisory authority emphasizes that the institution is “not systemically important” and therefore “does not pose a threat to financial stability”. According to the latest annual financial statement, the institute’s total balance sheet was just under 790 million euros, BaFin said. By comparison, Deutsche Bank’s total assets stood at €1.3 trillion in 2022.