On 10 March 2023, Silicon Valley Bank failed, triggering fears of a new financial crisis. Over the next three weeks, US bank share prices fell by 14% and regional banks fared even worse, at 33%. In short order, Signature Bank and First Republic failed and Credit Suisse had to be rescued by UBS.
It has been quiet since then. So, has the crisis passed?
We never believed that a reprise of the GFC was imminent. But that does not mean the problems for banks and investors are over. While real estate did not cause the recent bank failures, the fact that the banks hold $1.7 trillion of real estate loans – and real estate values are down some 24% on average from peak levels – suggests turbulence ahead even if the market is stable right now.
Chart 1
There are several reasons why the current situation is different from the GFC:
