Given recent events around Silicon Valley Bank’s failure, heightened market volatility, and broad uncertainty in the banking sector, Verus would like to share our perspectives, which can be accessed using the link below.
To summarize:
- Silicon Valley Bank (SVB) failed, and was then transitioned to government ownership on March 10th. New York regulators closed Signature Bank shortly thereafter, and there may be additional closures as conditions evolve.
- In reaction to this news, market impacts have been notable, with large moves in interest rates, adjustments in expectations for future Federal Reserve rate hikes, and seemingly indiscriminate selling of stocks across the financial sector.
- As new information has been received, it appears this situation is less about SVB specifically and more about broad interest rate mismatches in the banking system which have led to losses on bank balance sheets―some of which have not been widely recognized by investors due to their accounting treatment. The greatest risk to the financial system at this point appears to be a potential shock to confidence in banks. Most domestic banks are likely on solid financial footing but this could change quickly in the case of additional bank runs and large deposit withdrawals.
- Please use the link below to access a Verus presentation outlining the initial SVB failure, the broader story and risks to the financial system, as well as likely direct and indirect impacts on investor portfolios. Note that this deck incorporates information through March 13th. Due to the fluidity of the situation, Verus will provide additional materials and viewpoints to clients as new information is received.
