The recent collapse of Silicon Valley Bank (SVB), a regional US bank that funded start-up companies in the technology and innovation sector, has created a worldwide wave of financial instability.
Despite the efforts of US financial regulators to contain the potential damage by immediately providing full protection to the bank’s depositors, the collapse triggered a global dip in banking share prices.
The turmoil in financial markets led to the collapse of Swiss banking giant Credit Suisse, which was promptly taken over by UBS, an even larger bank. This was after an initial US$54 billion (£45 billion) lifeline from the Swiss central bank proved to be insufficient to rescue Credit Suisse.
How is it possible that the collapse of a relatively small financial institution like SVB could be so contagious as to end up having global consequences, including bringing down a 167-year-old financial institution like Credit Suisse?