We use the money to buy things like food, clothes, and toys. It’s important because we need it to live and do things we enjoy. Sometimes, there can be a crisis with money, which means there’s a problem. After seeing one bank collapsing after another, what is going to happen?
Last week Silicon Valley Bank collapsed, and the question was: Is it just the beginning? This means - I guess it is: Now we have news that First Republic Bank has some crises, and Credit Suisse needs 54 Billion as a lifeline.
While it can seem like a complex story of the banking and stock market at more, something is definitely going on, and the bubble is about to burst.
We also know that many startup investors withdrew money from Silicon Valley Bank just before it collapsed, and this trend seems to follow.
Recently, a bank called First Republic Bank had some problems with its money. Its stock, which is a way to measure how well the bank is doing, fell by 35%. This made some people worried that the bank might be unable to pay back the money it owed its customers.
To help the bank, a group of big banks agreed to deposit $30 billion into First Republic Bank.
This is called a rescue package. They did this to help the bank have enough money to pay back its customers and to keep the banking system strong.
However, even with this help, First Republic Bank’s stock fell by 21% after the rescue package. This is because the bank decided to suspend its dividend, which is a way to give money back to its shareholders. The bank wants to focus on reducing its debt and deciding what to do with its money in the future.
Credit Suisse’s troubles have raised concerns about the global financial system's stability.
Credit Suisse, one of the biggest financial institutions in the world and categorized as a “global systemically important bank,” has borrowed more than $50 billion from the Swiss National Bank after its shares crashed by as much as 30% on Wednesday, March 15, 2023.
The loan was a “decisive action to pre-emptively strengthen its liquidity” and reassure investors that it had the necessary cash to stay afloat.
The venerable but troubled bank, founded in 1856, has been hit by a series of missteps and compliance failures over the past few years that have damaged its reputation with clients and investors, and cost several top executives their jobs. Customers withdrew 123 billion Swiss francs ($133 billion) from Credit Suisse last year, mostly in the fourth quarter, and the bank reported an annual net loss of nearly 7.3 billion Swiss francs ($7.9 billion), its biggest since the global financial crisis in 2008.
Johann Scholtz, a European banking analyst at Morningstar, said Credit Suisse might no longer have enough capital to absorb losses in 2023 because its funding costs were becoming prohibitive.
Credit Suisse’s troubles have raised concerns about the global financial system's stability. The bank’s troubles highlight the need for stricter regulations to prevent systemic risks that could affect the stability of the entire financial system. The central banks' offer of financial support to Credit Suisse indicates that they are ready to intervene to prevent the collapse of a systemically important bank. However, the long-term solution is to prevent such crises from occurring in the first place by strengthening regulatory oversight and improving risk management practices.
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