Causes and consequences of the 2023 banking crisis

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents a discussion about the causes and consequences of the 2023 banking crisis in the United States. Using discourse analysis, the paper show that the 2023 banking crisis was the worst crisis in the US and Europe since the 2007-2008 global financial crisis. This banking crisis was caused by aggressive interest rate hikes by the US Federal Reserve. The increase in interest rates led to huge losses on the portfolio of government bonds held by US banks. The losses led to fears of bank collapse and triggered unprecedented deposit outflows which led to funding and liquidity problems for some banks and the eventual collapse of four banks – Silicon Valley Bank, Signature Bank, First Republic Bank and Credit Suisse. This crisis showed that the increase in interest rates can unmask hidden vulnerabilities in the banking system

Keywords: Banking crisis; interest rates; Silicon Valley Bank; regional banks; financial crisis; United States; Europe. (search for similar items in EconPapers)
JEL-codes: G00 G01 G21 G28 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ban and nep-mon
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