Why Banks Fail and What It Means for the Stock Market?

A lot, if not everything, in the world of finance, is based on trust: trust that the future would be better than the present; trust that a dollar bill would guarantee an equivalent worth of goods and services at a given point in time; and trust that wealth created would be safe, accessible, and transferrable […] May 11, 2023 [Option Sensei] [Why Banks Fail and What It Means for the Stock Market?]( A lot, if not everything, in the world of finance, is based on trust: trust that the future would be better than the present; trust that a dollar bill would guarantee an equivalent worth of goods and services at a given point in time; and trust that wealth created would be safe, accessible, and transferrable at all times. So, when events like those unfolding over the past fortnight undermine one or more of the aforementioned collective beliefs, the ensuing risks can quickly become systemic and existential. On February 24, KPMG signed an audit report giving SVB Financial, Silicon Valley Bank’s parent company, a clean bill of health for 2022. On March 10, federal regulators announced that they had taken control of the bank, which reopened the following Monday as [Deposit Insurance National Bank of Santa Clara.]( This was the second-biggest bank failure since Washington Mutual’s collapse during the height of the 2008 financial crisis. It was soon followed by the third-biggest, with Signature Bank shuttered by the regulators to stem the fallout from Silicon Valley Bank’s failure. The resulting crisis of confidence has somehow been contained with an assurance that all insured and uninsured depositors would get their money back, the announcement of a new lending program for banks, and 11 banks depositing $30 billion in the First Republic bank. However, the contagion risk subsided only after claiming an illustrious victim from the other side of the Atlantic, with UBS agreeing to take over its troubled rival Credit Suisse for more than $3 billion in a deal engineered by Swiss regulators. Since we are more or less up to speed, let’s look deeper into what can make banks seem unbankable in a little over two weeks. What is a bank failure? Banks earn their bread and butter by putting to work the money their depositors entrust with them. While the money can be invested to acquire assets that generate returns to keep a bank operating, it comes with the obligation to… Continue reading at [INO.com]( SPONSOR [Wall Street Veteran: "A New Wave of Crashes Will Rock US Stocks"]( The man Jim Cramer said he would never bet against is calling for a historic shakeup in the U.S. stock market. He called the 2020 crash and 2022 bear market. Now he says the next 90 days will determine your financial life for a decade. It doesn't matter if you have money in stocks right now, or are waiting on the sidelines. The short period we're about to enter changes everything. [Prepare here.]( Copyright © 2023 Wealthpop | All rights reserved. Magnifi Communities, 1 Penn Plaza, Suite 3910, New York, NY 10119 [Contact]( / [Terms & Conditions]( [Click here to unsubscribe](