Global Banks: Crisis of confidence sparks market turmoil

The collapse of Silicon Valley Bank sparked extreme volatility as frenzied selling of US bank stocks spread to wider markets. SVB is the third US bank to collapse this year as depositors grew concerned about its solvency and a rapid outflow of deposits meant the bank was faced with crystalising short-term losses by selling assets for less than their value if held to maturity. The US Fed and regulators managed to calm US markets, but investors turned their attention to global banks, including Credit Suisse.

Credit Suisse’s share price has fallen steeply in the last few years, following a string of scandals. Despite reassurance from the bank and Swiss regulators, sustained selling saw its share price tumble, adding pressure to global bank stocks. Investors moved money into government bonds, driving up prices and sending bond yields down sharply. Markets have calmed considerably but global equities were down this week, with bank shares experiencing big losses. Safe-haven assets like government bonds, gold and the dollar gained.

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