Comparing the SVB collapse to 2008 crisis: Why one professor says the two are different

While the current collapse of Silicon Valley Bank (SVB) and the problems surrounding Credit Suisse have shaken investor confidence, a repeat of the 2008 monetary disaster seems to be unlikely, one analyst says.

“I doubt that there will be another financial crisis. I wouldn’t really see where this is coming from,” Andreas Park, a finance professor on the Rotman School of Management on the University of Toronto, advised CTV’s Your Morning on Tuesday.

The failure of SVB earlier this month is the most important within the U.S. since Washington Mutual throughout the peak of the monetary disaster.

The failure of New York-based Signature Bank adopted quickly after.

SVB prospects started withdrawing their deposits, a scenario often known as a financial institution run, forcing SVB to promote its belongings at a loss as a result of larger rates of interest.

“So the bottom line is no bank has all the cash available to satisfy all deposits,” Park mentioned.

While the danger of a financial institution collapse in Canada shouldn’t be zero, specialists argue that the Canadian banking sector is extra tightly regulated.

“In the 2008 financial crisis, there were a lot of bad loans hidden on the books, they were on the balance sheets, put into specific special purpose investment vehicles that were hidden. We don’t have the same situation now,” Park mentioned.

Meanwhile, a number of the largest central banks on this planet, together with Canada, have tried to reassure markets within the wake of the collapse of SVB and Signature Bank, with UBS Group just lately buying rival Credit Suisse.

However, Park says the scenario involving Credit Suisse is unrelated to the SVB financial institution run.

“So I think people just should keep their money in the bank where it is and, at least in Canada, that’s my view here,” he mentioned.

Watch the total interview with Andreas Park on the prime of the article. With information from CTVNews.ca Writer Tom Yun, The Associated Press and Reuters.