GES1002T: Financial markets globally have been roiled by the collapse of California-headquartered Silicon Valley Bank: Global Economic Dimensions of Singapore Assignment, NUS, Singapore

Financial markets globally have been roiled by the collapse of California-headquartered Silicon Valley Bank (SVB) and the closure of Signature Bank in New York state over the weekend.

California-based Silvergate Bank, a crypto bank, announced earlier last week that it planned to wind down and voluntarily liquidate its operations.

By Tuesday morning, global financial stocks had lost some US$465 billion (S$627 billion) in market value as investors cut exposure to lenders from New York to Singapore, Bloomberg reported.

This was despite US regulators providing guarantees that all depositors from SVB and Signature Bank would be repaid in full. Up to US$25 billion was also made available to fund a new lending program allowing one-year loans to banks under easier terms.

Maybank senior economist Chua Hak Bin noted that the authorities had acted quickly to assure depositors and contain the risk of contagion and bank runs on other smaller regional financial institutions with less diversified clients.

Bank runs happen when depositors react to bad news about a bank by withdrawing their funds from the institution all at once, leading others to do the same.