One of the largest banks in Silicon Valley with total assets exceeding 270 trillion won has declared bankruptcy just two days after rumors of financial trouble emerged, causing global financial markets to shake.
Washington correspondent Nam Seung-mo reports on how this will affect us.
Customers of Silicon Valley Bank, which has played a role in funding for US West Coast startups, are in despair at the sudden news of its bankruptcy.
The most significant reason for the bank’s collapse was the sudden increase in interest rates by the US Federal Reserve.
With the value of the bank’s bond holdings plummeting due to the interest rate hike, they were forced to sell them at a loss.
This fact, combined with a sharp drop in the bank’s share price and a wave of deposit withdrawals, led to its collapse just two days after the rumors of financial trouble surfaced.
With total assets of 20.9 billion dollars, equivalent to 276 trillion won in our currency, it was the 16th largest bank in the US, and its bankruptcy was the second largest in history.
The New York stock market plummeted in response to the sudden news, and Asian markets, which closed before the bankruptcy announcement, were also affected by the news of a 52 billion dollar loss in market capitalization for the four largest US banks.
US financial authorities have responded immediately, but it is unlikely that interest rate hikes can be avoided in the near future.
The problem now is the anxiety that is spreading among investors and customers.
If large banks fail to alleviate their fears, there could be a wave of stock price crashes and massive withdrawals, leading to a repeat of the financial crisis.
This is why our financial authorities need to be vigilant in response to this situation.
This is Nam Sung-mo reporting from Washington for SBS News.
