The Silicon Valley Bank (SVB) collapse has caused a drop in consumer confidence throughout the U.S., based on search data. The bank’s collapse stems from the purchase of billions of dollars’ worth of bonds in the last couple of years by SVB using the deposits of its customers, a common procedure in the banking sector, but which, as in this case, can lead to disastrous consequences.
Generally, such investments are safe; however, their value fell because they paid lower interest rates than what a comparable bond would pay if issued in today’s higher interest rate environment. Because of this, the bank’s clients, who were mainly start-ups and tech-related businesses, began accessing their funds, which inevitably led to the bank having to start selling its own assets to meet customer withdrawal requests.
The bank tried to raise additional capital through outside investors but was unable to find them, therefore the Federal Deposit Insurance Corporation took over the institution, eventually closing it down.
Analysis of Google search data reveals that online searches for ‘Is my money safe?’ have risen 43 percent above the usual searches for this term over the last few days, based on Internet traffic from in the U.S.
This comes as news broke that yet another bank, the NYC based Signature Bank had to close as a consequence of SVB’s collapse on Friday March 10th.
New insights by Financial-World.org, provided to Digital Journal, reveal that as concern and panic started to spread among the U.S. populace, many took their questions to the web to understand the situation and to make sure their own savings were safe deposited in their bank after the second largest bank failure in U.S. history and the domino effect this has caused.
In terms of more specific details, U.S. citizens also searched for ‘What happened to SVB’, which rose 67 percent once again as the news broke out, four days after its original spike in searches, and ‘Why banks fail’, which rose almost 90 percent.
A spokesperson for Financial-World.org tells Digital Journal: “By hearing this news, it is only right that Americans began to question the system and seeking answers to their questions, one being if their money are safe deposited in their banks, as demise came to an institution that seems sturdy such as banks but that in reality can be extremely fragile.”
The statement continues: “In fact, the real problems started just as people began to worry that SVB wasn’t to trust with their money anymore and therefore withdrew everything they could. As the bank’s clients were mostly businesses, these were incredibly large amounts of money that the bank did not have.”
The situation was serious enough for the President of the U.S. Joe Biden to run a press conference where he reiterated many times that citizens have nothing to fear, that their money will be available when they need it.
