The collapse of Silicon Valley Bank and Credit Suisse and their impact on other U.S. Banks

Abstract

This paper examines how US banking industry responded to the collapse of Silicon Valley Bank and Credit Suisse. The analysis of abnormal returns surrounding the announcement of the collapse of Silicon Valley Bank and Credit Suisse reveals a negative and statistically significant impact on the largest listed US banks. Banks’ market value loss is explained by information asymmetries and uncertainty returns, systemic contagion, and panic. These reactions are reinforced or mitigated by bank-specific characteristics such as size, liquidity, profitability, risk aversion, operational efficiency, institutional ownership, internationalization, dependence on uninsured deposits and ratio of off-balance sheet items.