Silicon Valley Bank (SVB) collapsed Friday on March 10 mainly due to its poor invesment strategy and management crisis. At the time of its collapse it was the 16th largest bank in the U.S.
Most of the bank's deposits of $124 billion were invested in long-term Treasury bonds whose current market value fell as interest rates rose because of inflation. The bank was serving mostly venture capital funded start-ups.
By the way, SVB's collapse marks the second-largest bank failure in United States history.
But what SVB's collapse means for Russia?
Russian news channel Pravda outlined the following points:
- Silicon Valley startups have been ruined even though the USA needs innovations in its competition with Russia and China in the field of defence and logistics
- US Treasury Secretary Janet Yellen was more concerned about bailing out Ukraine than bailing out the US banking system. She will have to get down to business now or she will lose confidence otherwise. The US banking system has never been stress-tested for stability with an interest rate hike. Cheap loans mean everything for America, and they have sunk into oblivion
- Many countries all over the world will lose confidence in the US financial system. The number of companies that had credit lines opened with SVB was plentiful
The Fed will have to set the printing press going — this is not a good factor in terms of dollar credibility.
If the US financial system collapses, Russia will hardly be affected, because foreign investors' speculative sales in the Russian market are now impossible, and the Russian financial system is gradually releasing its currency from the dollar peg.
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