The saga of Silicon Valley Bank and Credit Suisse (US:CS), now rescued by a UBS buyout backed by the Swiss government, reignites all of the old debates over whether the banking sector is a truly viable proposition for investors given how volatility can hit a bank’s balance sheet. Liquidity issues overwhelmed SVB as depositors withdrew their money, while the scale of the reported outflows at Credit Suisse last week suggest it too was in a perilous state..
The last stage of contagion is when this panic focuses more closely on the contents of major banks' loan books - it remains to be seen whether this develops given that regulatory controls have given banks far greater levels of capital to absorb losses, unlike in 2008. It pays to understand what type of bank you are buying, but investors always must remember that the act of banking is to assume short-term risk in return for long-term profit.