Last month, the financial world held its breath as a global banking crisis emerged following a period of central bank-intermediated rising interest rates from 2022. Bank capital reserves declined due to falling bond prices which decreased the market value of the bonds, leading some banks to sell bonds at steep losses as yields on newer bonds were much higher. Bank liquidity shortages and insolvencies led to three bank failures in the US. Within two weeks, several of the world’s largest banks failed or faced takeovers.
The first bank to fail was cryptocurrency-focused Silvergate Bank. Silvergate announced it would wind down on Wednesday, 8 March, due to losses suffered in its loan portfolio. Two days later, after announcing a potential raise in capital, a bank run occurred at Silicon Valley Bank, causing it to collapse almost immediately. Signature Bank was closed two days later, with regulators citing systemic risks. On Sunday, 19 March, in Europe, well-respected Swiss banking giant Credit Suisse announced it was to be taken over by UBS to prevent the bank’s collapse. And although by the end of the month, media publications were saying that ordinary people need not worry and that there isn’t the same system-wide problem that caused the 2008 financial crash, the financial world is still braced for the impact of the recent bank collapses.
In an annual letter to shareholders, Jamie Dimon, chief executive of JPMorgan Chase – America’s biggest bank – warned that the crisis facing the US banking system is not yet over. He said, “There will be repercussions from it for years to come. But importantly, recent events are nothing like what occurred during the 2008 global financial crisis (which barely affected regional banks). In 2008, the trigger was a growing recognition that $1 trillion of consumer mortgages was about to go bad – and they were owned by various entities around the world… This current banking crisis involves far fewer financial players and fewer issues that need to be resolved.”
While not comparable to 2008, Dimon said the failure of SVB and Signature Bank, and the takeover of Credit Suisse, had provoked “lots of jitters in the market” and were likely to prompt leaders to pull back shortly, increasing the likelihood of an economic recession. However, he isn’t sure if regular American consumers will likely be affected. Moreover, it’s important to note that the financial world changes daily, and it’s difficult to measure where fragilities may lie among the changes.
As traditional banks discuss and prepare for the potential of a complete global banking crisis, digital banks have remained unharmed. San-Francisco based digital bank Mercury reported a surge in account opening requests in the days following the collapse of Silicon Valley Bank. In just six days, the company added more than $2bn in deposits and thousands of customers to their initial 100,000 customer base. Talking to Forbes, CEO and cofounder Immad Akhund said, “I had a lot of respect for Silicon Valley Bank. I used them at my previous company. I’m sad about it, really, it’s been a real mix of emotions.”
Another San Francisco-based fintech, Brex, also gained popularity from the collapse of SVB. The credit card startup, which offers business banking services, added 3,000 new customers as Silicon Valley Bank collapsed and reportedly took in billions in new deposits. In addition, Brex extended loans to former SVB customers to keep them on their feet. The increase in digital banking customers is expected following a traditional banking crash due to the simplicity, quick pace and security that challenger banks offer.
A key fintech player looking to find themselves a winner is Black Banx. The digital financial services platform, founded by German billionaire Michael Gastauer, is an established banking service providing to over 20 million customers in 180 countries. Its borderless and instant approach makes it an excellent choice for anyone suffering the effects of loss due to a financial institution breakdown. Black Banx is offering real-time account openings for private and business clients. They provide cross-border payments and account openings in 28 currencies, and with its proprietary software IRTP, recipients can get funds credited instantly to their bank accounts. With Black Banx, senders pay ten times less than traditional banks, and customers can transact money through their account balances, Bitcoin or debit cards.
As the JPMorgan Chase chief executive commented, it’s unlikely that regular customers will bear the brunt of a near-future financial crisis. So far, especially in terms of the SVB collapse, wealthy individuals and startup businesses have been primarily affected. Because of this, security is paramount when it comes to funds. Black Banx protects client money with industry-leading security tools and a global diversification concept, ensuring fund security is at the forefront of its operation.
As concerns around a potential global financial crisis remain with expert opinion split, the digital banking service Black Banx is an advantageous choice.
