Fears of a repeat of the 2023 banking crisis resurfaced, sending shockwaves through global markets. The trigger? Two US regional banks, Zions Bancorporation and Western Alliance, revealed significant losses from bad loans, drawing “inevitable comparisons” to the collapse of Silicon Valley Bank (SVB).
The cause was Zions’ $50m write-off and Western Alliance’s $100m bad loan. Though small, these incidents sparked fears of a “domino effect,” especially following the recent bankruptcies of sub-prime lender Tricolor and auto-parts supplier First Brands.
The market reaction was swift and brutal. Bank stocks plunged globally, with European lenders losing over €37 billion in value. Barclays and Deutsche Bank were among the biggest fallers. Indices in London, Frankfurt, Paris, Tokyo, and Hong Kong all dropped significantly.
The news fueled a “wall of worry” among investors. The VIX volatility index, known as the “fear index,” surged by over 22%. Investors abandoned risky assets and fled to the safety of gold, which hit a new record price of $4,378 an ounce, its best week since the 2008 financial crisis.