Silicon Valley Bank Collapse Should You Worry

by Dilip Shaw Updated: March 21, 2023

in Newsletters

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This is a copy of my newsletter sent to my subscribers on Tuesday, 14th of Mar 2023. You can fill out the form above to receive my newsletters.

Silicon Valley Bank Collapse – should you worry?

During March 2023, three large banks in the United States with significant exposure to the technology sector and cryptocurrency collapsed.

If you are my old newsletter subscriber you may remember that I told you many times not to invest in cryptocurrencies. If big banks with lots of exposure to cryptocurrencies can fail – what makes you think that you will not fail?

The First Bank to Fail: Silvergate Bank.

It announced it would wind down on March 8, 23 due to losses suffered in its loan portfolio.

The Second Bank to Fail: Silicon Valley Bank

This bank which had given loans to technology startup companies – mostly bad loans which never got recovered caused the Silicon Valley Bank to collapse and be taken over by regulators on March 10, 2023.

The Third Bank to Fail: Signature Bank

Signature Bank, a bank that frequently did business with cryptocurrency firms, was closed by regulators two days later on March 12, 2023, with regulators citing systemic risks.

Not sure what will happen to the money of the depositors but I am sure the authorities in the US do have some mechanism whereby the money deposited by innocent investors is not lost. US President Joe Biden promised that investors will not lose their money invested in the bank.

Should an Indian investor worry and sell banking stocks as they are falling since this news broke out?

NO.

Because the above banks do not have much exposure to Indian banks, so why share prices of our banks are falling?

NEWS, followed by PANIC.

It’s just that the investors fear that the Indian banks may be impacted too and will also fall. The truth is nowhere near that.

So hold and wait for banking stocks to recover.

Update:

Credit Suisse, a 166-Year old bank having its headquarter in Zürich, Switzerland, also collapsed in Mar 2023. Credit Suisse was more popular and trustworthy than the other banks that failed. Yet it failed.

If you hold banking stocks I suggest you wait for one year at least. They will bounce back.

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Silicon Valley Bank Collapse Should You Worry

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