The bankruptcy of Silicon Valley Bank (SVB) poses a serious systemic risk to the US banking system and the whole world, according to Zhu Min, the deputy director of the Chinese Center for International Economic Exchanges. He stated that although the bank is not systemically important, the nature of its bankruptcy makes it so. The world has just experienced the longest 15-year period of monetary policy easing and fiscal stimulus, as well as the most rapid rise in interest rates in history, which has amounted to 500 basis points in the past 12 months.
Additionally, SVB’s problems were caused by imbalances in its capital structure and ineffective risk management. The collapse of Silicon Valley Bank caused a market downturn in the US and Europe. Banks fear that they may face a funding shortage due to bond losses, despite political leaders’ assurances that there is no risk of contag