Other events in the banking sector (03/13/2023)

After SVB (Silicon Valley Bank), Signature Bank has now also been closed. The crypto market rallied strongly on Sunday after Treasury Secretary Janet Yellen, FED Chairman J. Powell and the FDIC announced that their respective customer deposits would be secured. However, the banks, or rather their shareholders and certain bondholders, are deliberately not being bailed out. This decisive action is intended to strengthen confidence in the banking system and protect the economy and jobs. SVB clients will have full access to all their money as of today, Monday. The deposits of Signature Bank will be protected in a similar way as those of SVB. According to information from the authorities, the liquidation of both banks will not be covered by the taxpayer. The closure of SVB has also caused Circle's stablecoin USDC to lose its peg to the USD, as the company had about USD 3.3 billion in reserves deposited with the bank. Stablecoin USDC recovered after the authorities' announcement, but has not yet fully returned to its 1:1 ratio to the USD. USDC operator Circle lacks a key infrastructure in processing payments with Signature Bank, which can be shifted and absorbed by the well-known bank BNY Mellon for the time being. The important crypto exchange Coinbase and the stablecoin operator Paxos, which hold deposits of approximately USD 240M and USD 250M, respectively, at Signature Bank, should be protected accordingly.

Accordingly, there is speculation in the media whether the Fed will continue its path of monetary tightening on March 22, after these uncertainties around the banking system have arisen. Currently, the rate hike of 0.5% seems to be off the table again, with the market currently seeing the probabilities for a missing rate hike at around 34% and for +0.25% at 66%. To what extent the contagion risk is manageable due to the rather specific client structure of SVB, which mainly serves tech and startup clients, remains to be seen.(Source | Source 2 | CME FedWatch Tool

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