Andrey Rudakov | Bloomberg | Getty Images
The fallout from the shuttering of Silicon Valley Bank — the second-largest bank collapse in U.S. history — continued Monday, dragging down international banking stocks.
European banking stocks were down 5.5% at 10 a.m. London time on Monday, after closing 4% lower on Friday, as U.S. financial regulators shut down SVB and took control of its deposits. All major U.S. indexes closed at least 1% lower on Friday amid the SVB panic, while regulators shut down Signature Bank — one of the cryptocurrency industry’s main lenders — on Sunday, citing systemic risks.
U.S. federal regulators said that all deposits will be made whole, in a relief to many depositors. But the SVB crisis is far from an isolated incident, and its roots lie in a bigger systemic problem, many investors and analysts say.
“With regard to who’s to blame here, I think that the greed and avarice that has long been present in Silicon Valley has come home to roost,” Keith Fitz-Gerald, a trader and principal of the Fitz-Gerald Group, told CNBC’s Capital Connection on Monday.
“We had the Federal Board of Reserve change from fractional reserves to no reserves, and that let banks like SVB go out and start buying assets instead of simply loaning money,” he said. “My contention is banking should be boring, a lot like watching paint dry — and any time it’s not, you’ve got a problem. Which is unfortunately what happened.”
SVB — the 16th biggest bank in the U.S. at the start of last week — had been operational for 40 years and was considered a reliable source of funding for tech startups and venture capital firms. The California-based commercial lender was a subsidiary of SVB Financial Group, and it was Silicon Valley’s largest bank by deposits.
SVB Financial Group’s holdings — assets such as U.S. Treasurys and government-backed mortgage securities viewed as safe — were hit by the Fed’s aggressive interest rate hikes, and their value dropped…
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