First, Silvergate Bank announced its bankruptcy. The main reason known is that the bank transfers most of its funds to the cryptocurrency market through the cryptocurrency exchange and venture fund company called FTX. It transfers some of its assets to Treasury securities. However, as FED raised interest rates, the value of Treasury securities declined, and with the collapse of FTX in November 2022, the company could no longer exist and went bankrupt.
The second bank to go bankrupt after Silvergate Bank is Silicon Valley Bank. Silicon Bank invested its funds mainly in government securities, but again it made a loss of $1.8 billion due to the rate hike from FED. Although it announced that it would increase its capital to make up for this loss, the bank's stock values took a serious dive. Ultimately, this led to the 16th largest bank in the world going bankrupt.
In conclusion, Signature Bank, which announced its bankruptcy, transferred most of its resources to the cryptocurrency exchange FTX, which was the reason for its bankruptcy.
So what is the reason for these bankruptcies? As you can see, the most important reason is that banks in the U.S. banking sector have limited transaction volumes without spreading their resources across a wide range. If the right practices are applied, these bankruptcies can be prevented in a short period of time, but if the wrong practices continue, they can be expected to reach a global dimension.
Assoc. Dr. Burcu SAVAŞ ÇELİK
