From the USA to Europe: why the slippage of Silicon Valley Bank is plunging the entire financial and banking sector in its wake

But here, however, it seems that the risk is confined solely to financial players active in venture capital in the United States. As we know, however, traditional banks mix their investments, and it is likely that many of them are at least partially exposed to riskier investments. On the American site MarketWatch, we can read about this “big dip” that at least ten American banks will face problems within the framework of the debacle of the SVB Financial Group, at the source of the current malaise.

SVB sells assets in panic

This financial group is the parent company of a Californian bank, Silicon Valley Bank, which announced Thursday that it had taken emergency measures to bail itself out. It carried out a capital increase of 2.25 billion dollars, and above all, it hastily sold 21 billion dollars of securities in its portfolio, losing 1.8 billion dollars on the value of its assets. .

Uber, Spotify, Airbnb… Why do investors support companies that are losing hundreds of millions of dollars?

In question, the withdrawal of many customers, the famous “bank run”, feared by all players in the sector. His commercial target? California tech start-ups going through turbulent times due to rising interest rates and tighter access to credit. The operations carried out by SVB to ensure its buoyancy did not convince the market, and on Thursday evening, SVB Financial Group securities lost more than 60% on the Nasdaq. Out-of-hours trading shows Friday morning a continuation of this fall and another loss of nearly 55%. The beginning of this descent into hell is, however, much earlier since the fall began in early November 2021, at the start of the rise in interest rates which marked the beginning of the correction on American technology stocks. At that time, SVB stock was trading around $720. Off trading, it was being traded on Friday at the start of the afternoon at 48 dollars…

Flight to safety

The managers, who had a very profitable start to the year in terms of assets listed on the stock exchange, did not wait to find out more to carry out a rapid reduction in their positions in the financial sector, which had been on a rather positive trend in recent weeks. Sales calling for sales, all the big names in the European banking sector therefore ended the week with falls of around 4 to 5%, and their relative weight in the portfolios led managers to sell shares in other sectors, in favor of assets bonds, safer. A classic flight to safety.

“Tech companies, in general, burn a lot of money and are not profitable.”

Cryptos in turmoil

From technology financing to cryptocurrencies, there is often only one step, since many companies active in digital assets are registered in this sector that is both technological and financial. Major cryptocurrency carriers therefore sold their positions during the hours following SVB’s announcements, which resulted in a heavy relapse of these assets, including bitcoin, which fell below the 20,000 dollar mark, against 26 000 dollars less than three weeks ago.