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NEW YORK, Mar 11 The American banking system will be in a fever in the near future due to the bankruptcy of one of the country's largest Silicon Valley Bank, but this will not entail a systemic crisis of the entire system , said Kyle Szostak, director of the American investment company Navigator Principal Investors.
«This is unlikely to turn into a full-fledged banking crisis. This bank is not the size — it did not reach $ 250 billion in deposits, it was somewhere in the region of $ 210-220 billion in terms of deposits. So it was 16- th in the list of the largest banks in the US That is, it was in the top 20, but was not the largest,» Shostak said.
According to him, the bankruptcy of Silicon Valley has already affected the valuations of banks of comparable size, «whose shares have seriously sank in recent days.» «This is, in particular, First Republic Bank,» the investor explained.
«We can say that the American banking system will, of course, be in a fever in the near future. This will especially affect banks from the second ten. But in general, this will not cause a systematic crisis in the entire banking system,» Shostak stressed.
Silicon Valley Bank «was quite idiosyncratic and very much focused on servicing high-tech companies from Silicon Valley,» the source said. «Sectorally, he was strongly focused on serving high-tech companies such as Life sciences, IT. And he was very much tied to servicing crypto clients. The crypto industry, blockchain companies were among the top clients,» Shostak said.
In his opinion, now «wine companies from California will suffer greatly, because it was the main bank for California wine companies.»
As Shostak believes, the bankruptcy of the bank will «aggravate the situation of the crypto sector.»
«There is such a payment instrument USDC — US stablecoin. It is pegged to the dollar. And this Silicon Valley Bank was one of the main partners of this cryptocurrency. Its value has now fallen very much. This will greatly undermine the position of the crypto- currencies,» the investor added.
Explaining what happened to Silicon Valley, he noted that the bank invested its banking capital in long-term US bonds. «What killed them? As we know, the Fed is aggressively raising rates. And the feedback works here — when rates rise, the yield of bonds increases, but the cost decreases. This is inversely proportional,» Shostak said.
“The value of their capital, the value of their portfolio, went down a lot, to the point that they were forced to sell a significant part of their capital at a big loss to themselves. And when they realized this loss, the Fed, regulators and rating agencies put them on a rating review. rating agencies announced to them about a big problem with liquidity, clients (IT companies) began to massively withdraw deposits from their accounts,» the investor said.
“Another bank that looks like them and will be under pressure is Signature Bank. It, like First Republic Bank, provides services for cryptocurrencies, converting them into dollars. They will be under a lot of pressure. I think that such as they, this story will greatly affect,” he added.
California regulators have shut down Silicon Valley Bank (SVB), the largest bank to fail in the US since the last financial crisis, according to the Federal Deposit Insurance Corporation (FDIC). The FDIC transferred all insured deposits from the SVB to a separate entity it created, the Deposit Insurance National Bank of Santa Clara.
U.S. Treasury Secretary Janet Yellen met with regulators on Friday and expressed confidence in their ability to handle the SVB situation.