Cooking the Books podcast: Why higher interest rates are causing banks to collapse

Silicon Valley Bank was the 16th-largest bank in the US before collapsing. Photo / AP

Each week, BusinessDesk and the NZ Herald’s Cooking the Books podcast tackles a different money problem. Today, it’s a banking expert on how safe savings are in New Zealand and Australia. Hosted by Frances Cook.

A bank collapse is the stuff of nightmares, with the potential to wipe out hard-earned savings, or the ability of a business to pay staff.

This nightmare has become reality in the US, with a run on Silicon Valley Bank, or SVB, that led to the bank collapsing.

It’s a big deal because SVB is, or was, the 16th-largest bank in the USA. It’s the second-biggest to fail since Washington Mutual’s collapse during the 2008 Global Financial Crisis.

For context, it’s a bigger bank than ANZ here in New Zealand, which is our biggest bank. SVB had assets of US$209 billion, while ANZ NZ has assets of US$120b (NZ$195.6b).

It’s been followed by a couple of other worrying developments.

Credit Suisse was Switzerland’s second-largest bank – but it’s being bought out in an emergency rescue deal by the country’s biggest bank, UBS.

UBS is snapping up their rival for a bargain three billion Swiss francs, which is about 60 per cent less than Credit Suisse was supposedly worth before it hit panic buttons.

Meanwhile, back in the US, Signature Bank has been shut down and is likely to have its deposits and loans bought out by Flagstar Bank.

Not great.

So, could it happen here, and should we all New Zealanders be worried?

For the interview, listen to the podcast here.

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