![]() ![]() After every banking crisis, new rules are put into place to reduce or minimize these risks to the economic system, but in spite of these rules or sometimes because of them, there are new crises. The Value of a Bankīanks have been an integral part of business for centuries, and while we have benefited from their presence, we have also been periodically put at risk, when banks overreach or get into trouble, with their capacity to create costs that the rest of us have to bear. The overarching questions for us all are whether this crisis will spread to the rest of the economy and market, as it did in 2008, and how banking as a business, at least in the US, will be reshaped by this crisis, and while I am more a dabbler than an expert in banking, I am going to try answering those questions. The banks that have fallen so far collectively controlled more deposits than all of the banks that failed in 2008, but unlike that period, equity markets in the United States have stayed resilient, and even within banking, the damage has varied widely across different segments, with regional banks seeing significant drawdowns in deposits and market capitalization. That failure has had a domino effect, with Signature Bank ( OTC:SBNY ) falling soon after, followed by Credit Suisse ( CS ) in April 2023 and by First Republic (FRC) last week. In March 2023, the fall of Silicon Valley Bank ( OTC:SIVBQ) shocked investors not only because it was unforeseen, but also because of the speed with which it unfolded. ![]()
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