Rabobank's global strategist Michael Every notes:

"The failures of Signature Bank, Silvergate capital, Silicon Valley Bank (SVB) - the second largest in US history, then another in New York, due to their holdings of crypto rubbish *and* safe assets like 10-year Treasuries as ‘lower for longer’ is eviscerated, shows how vulnerable parts of the financial system are," Mr Every says.

"SVB, now being carved up, found itself in the curious position of having been brought down by being given too much money. After the Fed cut interest rates to all-time lows in 2020, and consequently set off a renewed boom in growth company valuations, its deposit base more than doubled: the bank pumped the excess cash into “safe” US Treasuries and mortgage-backed securities. When the Fed began aggressively raising rates in 2022 the valuations on those securities went south in a big way, leaving SVB nursing mark-to-market losses in the vicinity of $23bn.

"SVB tried to assure investors these mark to market losses weren’t a problem because the securities would simply be held to maturity. That strategy unravelled when the depositors started asking for their money back. The bank was forced to liquidate long duration assets at steep losses. This begs the question as to why the balance sheet wasn’t hedged? Holding that kind of interest rate risk in the banking book is a big no-no.

"But if SVB has done it, might some other banks also be running unhedged mark to market losses on security holdings? And just how exposed to SVB are other banks?

"Investors were obviously asking themselves these questions when they dumped US bank stocks late last week. This crisis thus threatens mass on-line bank runs with no need to queue up like in the movies anymore: indeed, why not put your money in T-bills at 5% rather than bank deposits offering zero?

Mr Every says it underlines systemic issues for banks and shadow banks: "The former already facing an inverted curve, and now perhaps the need to increase deposit rates rapidly to hold on to funds.

"There is also the direct issue of $170bn in SVB depositors funds (with everything over $250,000 nominally uninsured). The deposits were largely made by tech start-ups and rich Californians (and Democratic party donors), reportedly including Harry and Meghan, and Oprah. 

"There are reputations at risk here, as the SVB board were all heavy-hitters. Perhaps a warning sign, its Chief Administration Officer Joseph Gentile was formerly the CFO of Lehman Brothers!

"Blaming the Gentile over a financial crisis is a new variant on an old theme we are about to hear more of, we sadly expect. Because “You get a bailout! And you get a bailout! And you! And you!” is now being heard by everyone involved."