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Causes and consequences of the 2023 banking crisis

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  • Ozili, Peterson K

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

Suggested Citation

  • Ozili, Peterson K, 2024. "Causes and consequences of the 2023 banking crisis," MPRA Paper 120153, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:120153
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    File URL: https://mpra.ub.uni-muenchen.de/120153/1/MPRA_paper_120153.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Banking crisis; interest rates; Silicon Valley Bank; regional banks; financial crisis; United States; Europe.;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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