Bear Stearns, Lehman, SVB… Reasons why big banks only fail on Fridays

Major banks, including Bear Stearns and Lehman Brothers, which triggered the global financial crisis in 2008, and Silicon Valley Bank (SVB), which triggered this year’s banking crisis, collapsed on Friday.

According to the global capital market media ‘The Covey Letter (TKL)’, the day Bear Stearns faced a liquidity crisis in 2008 (March 14) and the last trading day before Lehman Brothers declared bankruptcy (September 12) were both Fridays. The collapse of Washington Mutual in 2008 (September 26), recorded as the largest bankruptcy in history, was also on a Friday.

The tradition of big banks going bankrupt on Fridays only has been repeated this year too. It was also Friday, March 10th, when SVB, which caused panic in the financial market last month, finally went bankrupt. Negotiations on the acquisition of Credit Suisse (CS), a global investment bank (IB) facing a liquidity crisis due to large-scale investment failures in Europe, to UBS, the leading Swiss bank, also began on Friday, March 17 .

Why do we often hear about a big bank crash on a Friday? Experts point out that the reason for this is that the authorities can take control of the situation over the weekend and prevent ‘Black Monday’ (a crash in the stock market on Monday) to some extent. Before official bankruptcy, the bank discusses post-processing issues with the authorities in private, and the authorities lead Friday as the D-day to minimize the impact on the market. In fact, even when SVB declared bankruptcy on the 10th of last month, the US financial authorities announced measures to guarantee full deposits over the weekend, putting out the emergency fire. Federal Deposit Insurance Corporation (FDIC) spokesman David Barr told CNN Business that after the bank closes on Friday (Monday morning), they have 60 hours to restore the situation before the stock market opens.I working on resolving and weeding out assets worth liquidating. .”

Meanwhile, the US banking crisis is accelerating deposit outflows. According to Bloomberg News, as US commercial banks withdrew US$125.7 billion (about 165 trillion won) from the 16th to the 22nd of last month, total deposits in US banks fell at the end of last month 4.4% year on year to US $17.3 trillion (about 2.26 trillion won). . This is the lowest level in a year and 8 months since July 2021.