The events of the past week have led to the ghosts of 2008 making a sudden reappearance. Turmoil started with the collapse of Silicon Valley Bank (“SVB”), a regional US bank, continued with the failure of another regional lender, Signature Bank, and then appeared to spread to Europe with Credit Suisse (“CS”), a globally systemic institution, coming under severe pressure.
Many other banks have seen their share prices drop sharply and market conditions have deteriorated. A group of large US banks orchestrated a deal to save First Republic,
a third US regional bank coming under pressure.
Worries about the health of bank balance sheets are fuelling turmoil in global markets among fears that this could be the start of the next global financial crisis (“GFC”).
In this paper we explain what happened to each of these banks, how the situation differs from 2008, and what the major risks are going forwards.
These events once again underline what we believe are the structural advantages of Private Debt as an asset class, compared to traditional bank lenders. We also believe that the current pressure on banks and the liquid markets will increase the attractiveness of Private Debt firms as an alternative and reliable source of finance to companies.
