Blame traditional finance for the collapse of Silicon Valley Bank

  • 📰 Cointelegraph
  • ⏱ Reading Time:
  • 45 sec. here
  • 2 min. at publisher
  • 📊 Quality Score:
  • News: 21%
  • Publisher: 51%

Business News News

Business Business Latest News,Business Business Headlines

Opinion: The banking system is built on the assumption that depositors won't ask for their money at the same time. What happens when that assumption fails?

The entire banking concept is based on the assumption that depositors will not want to withdraw their money at the same time. But what happens when this assumption fails? The answer lies in the asset-liability mismatch of banks, which can lead to disastrous consequences for the broader financial system.

NII is a crucial financial metric used to evaluate a bank’s potential profitability, representing the difference between interest earned on assets and interest paid on liabilities over a specific period, assuming the balance sheet remains unchanged. On the other hand, EVE is a vital tool that provides a comprehensive perspective of the bank’s underlying value and how it responds to various market conditions — e.g., changes in interest rates.

Furthermore, SVB found itself in a “too big to fail” scenario, where its financial distress threatened to destabilize the entire financial system, similar to the situation faced by banks during the Continuing the Silicon Valley Bank case, it is evident that Silicon Valley Bank’s exclusive focus on NII and NIM led to neglecting the broader issue of EVE risk, which exposed it to interest rate changes and underlying EVE risk.

 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.

Sounds like a pyramid scheme (scam) to me

Well, if it wasn't for ATM machines, there wouldn't be this problem in the first place! bankingsystemfail

That is just one of a multitude of assumptions, another being that it’s ok to loan your deposits back to you and charge you interest and fees. Would you like to add another?

We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 562. in BUSİNESS

Business Business Latest News, Business Business Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

HSBC Acquires Silicon Valley Bank UK — Sale Facilitated by Government, Bank of England – Finance Bitcoin NewsThe British government and the central bank, the Bank of England, have facilitated a private sale of Silicon Valley Bank UK to HSBC.
Source: BTCTN - 🏆 531. / 51 Read more »