A major bank in Silicon Valley with total assets exceeding 270 trillion won has gone bankrupt just two days after rumors of financial crisis surfaced, causing turmoil in global financial markets.
Washington correspondent Nam Seung-mo reports on how this will affect us.
Silicon Valley Bank, which has played a role in funding startups in the western United States, suddenly went bankrupt.
Customers are bewildered by the news.
The rapid increase in interest rates by the US Federal Reserve was the biggest reason for the bankruptcy.
As the value of bank-held bonds plummeted due to the interest rate hike, funds dried up and losses were incurred by selling bonds.
When this fact was revealed, a crisis of plummeting stock prices and deposit withdrawals occurred, causing the bank to collapse just two days after rumors of a financial crisis surfaced.
With total assets of $209 billion, equivalent to 276 trillion won in our currency, it is the 16th largest bank in the United States and the second largest bankruptcy in history.
As an unexpected disaster, the New York Stock Exchange fell sharply.
Asian stock markets also shook when news spread that the market capitalization of the top four banks in the US had evaporated by $52 billion the day before.
US financial authorities immediately took action, but it is not a relief as interest rate increases will be inevitable for the time being.
The problem is the sense of anxiety.
If US financial authorities fail to ease investor and customer concerns, a major bank could be a tinderbox and a financial crisis could be repeated.
This is why our financial authorities should be cautious about this incident.
This is Nam Seung-mo, reporting from Washington for SBS News.