TEXAS, USA — March has been a rough month for banks.
On March 10, Silicon Valley, one of the largest holding companies to fund business units and groups all over, collapsed.
Furthermore, with many today having experienced the financial hardships that came from the 2008 financial crisis 15 years ago, the severity of the news brings forward a question: are we on the verge of another financial crisis?
One finance scholar says that part of being prepared for what may happen is not panicking.
“What the federal government is trying to avoid as much as they can is a financial meltdown,” said Evgenia Gorina, a finance sector expert.
Gorina studies the trends at the University of Texas at Dallas, and also explained how we can use lessons taught in previous financial crises to properly prepare for what may come.
When people went to withdraw money from banks like JP Morgan or Chase bank in a panic for what was happening on Wall Street, they weren't able to get their money due to the fact that banks don't keep all the cash of their member accounts on hand.
That factor combined with the Wall Street stock market crash and subsequent laying off thousands of Americans in the process changed the lives of some permanently.
However, Gorina explained how what the world saw with the Silicon Valley Bank is not a repeat of 2008.
"After the great recession they have been trying to make the financial system resilient and stable because we view financial stability as a very important good,” said Gorina. “The federal reserve actually believes the turmoil in the financial sector is not gonna happen.”
Stress testing and improving regulators on big banks were ways the finance sector to prevent another major financial crisis, according to Gorina.
“So banks runs themselves, in fact when people start going for their deposits at the bank at the same time, they can ruin and they can create trouble for otherwise very healthy banks,” said Gorina.
That is what led to the 2008 crash, she said.
Though to prevent another depression, she advises people to continue proceeding with your regular financial activities like normal and to not panic.
“Regulators are focused on preventing another financial meltdown,” she said.
Recently, all 17 branches of SVB were bought by First Citizens Bank, creating what looks to be temporary stability alongside an averted financial collapse in the hopes of restoring the confidence of banks in investors.