US Banking Crisis in 2023 and Its Implication...

US Banking Crisis in 2023 and Its Implications for American Economy

Author Name : Deepto Chakraborty

INTRODUCTION March 2023, will be remembered as one of the biggest catastrophes in the US banking sector. Over five days in March, three small to medium-sized banks failed miserably. The absolute disaster of the US banking crisis originated from Silicon Valley Bank (SVB) and the bank run triggered after selling out its Treasury bond portfolio at a huge loss that possibly shattered the trust of depositors from this bank and made them concerned about the bank’s liquidity. After all, interest rates had risen after the bank had shifted its portfolio. In response to the bank's failure, the three most prominent US federal regulators for example Federal Reserve and National Credit Union issued a statement and made collective efforts to ensure that all depositors for deposits at Silicon Valley Bank would be honored. To stave off the serious repercussions on the US banking system, the global industry regulators including the Federal Reserve, The Bank of Japan, the European Central Bank, and the Swiss National Bank intervened injecting huge liquidity. In this brief write-up, an attempt has been made to explore the main reasons for the debacle andits contagious effect on the US economy.