The Banking Collapse of March 2023 Remains Uncertified

The banking collapse that began in March 2023 without being certified

On March 8, 2023, the financial system made a noise not heard since Lehman Brothers. Silicon Valley Bank plunged more than 60% on the stock market, dragging down half of the US regional banking sector and, within hours, triggering all the alarms that had been dormant for a decade. Bitcoin dropped 7% in five hours, falling from $20,635 to $19,000. Major names like JP Morgan, Morgan Stanley, and Bank of America trembled. Yet, three years after that panic, the collapse remains uncertified. It has neither fully materialized nor disappeared.

What began as a specific technical failure evolved into a phenomenon that must be understood in two phases: the instant shock and the slow digestion. The question is no longer whether the system will hold. It's what it means that it is holding like this.

What Really Peine in March 2023 with Regional Banks

The trigger was a mid-sized bank with tech depositors and a bond portfolio bought at negligible interest rates. When rates began to rise, that paper lost value in the secondary market. And when customers wanted to withdraw their money, the bank had to sell at a loss what didn't match its balance sheet value. A $1.8 trillion error at the worst possible moment.

The domino effect was instantaneous. On March 13, several US bank stocks were suspended after the opening, with drops that defied any reasonable scale. The comparison with the 2008 crisis was not rhetorical: the interconnectedness of balance sheets meant that one bank's problem was everyone's problem.

In parallel, Bitcoin saw its sharpest turn. It went from being the punished asset to becoming, in just days, the destination for money fleeing suspicious entities. Gains of 20% in 24 hours, with movements of $1,000 per hour. The irony was that the crypto asset that had fallen the most was now the refuge.

The Collapse of Credit Suisse and the Express Rescue by UBS

If Silicon Valley Bank was the warning, Credit Suisse was the earthquake. The Swiss bank had faced fruta and solvency issues for years, but an external detail brought it down: a large Saudi bank announced it would not invest further. Credit Suisse's one-year CDS soared to 3,326, and all eyes turned to the European Central Bank.

The outcome came on a Sunday, when UBS closed the acquisition of Credit Suisse for over $2 billion in its own shares—approximately €1.9 billion—a bargain price for a century-old institution. The Swiss National Bank injected around $100 billion in liquidity to support the operation. Switzerland, the country that had built its prestige on neutrality and banking secrecy, had to improvise an emergency merger between its two largest entities.

The unease was not just financial. Accounting rules were modified on the fly during the rescue, leaving many readers with the impression that rules are only respected when they are convenient. The feeling of a two-tiered system spread faster than the rescue itself.

Why Devalued Bonds Broke the Banks

Behind the noise was a simple and brutal mechanism. Banks bought government debt when rates were zero or even negative. When the Federal Reserve and the ECB raised rates to curb inflation, those bonds lost market value. As long as no one sold them, there was no accounting problem. The moment a depositor wanted their money, the bank had to liquidate those bonds at a loss.

The most common diagnosis in analyses circulating: the system cannot withstand interest rate hikes because it is hyper-indebted, and each hike cracks something different. Others argued the opposite: that the only way to avoid perpetuating inflation was to keep raising rates until everything broke and rebuild from scratch. The Fed opted for a middle path, with a 0.25-point hike, and from then on, the debate shifted.

The question was no longer if the collapse was coming. It was whether the collapse had become a permanent condition, sustained by liquidity injected discreetly.

The Invisible Rescue: BTFP, FDIC, and 186 Banks in the Spotlight

One of the most detailed analyses of the storm described the structure with surgical precision: the FDIC guaranteed all SVB deposits, the Fed launched the Bank Term Funding Program (BTFP), allowing devalued bonds to be parked at the central bank in exchange for 100% of their original value, and the Discount Window expanded its scope to almost any asset. In translation: the rescue was carried out without being called a rescue, using the existing emergency window.

A Wall Street Journal report cited at the time indicated that up to 186 banks could face similar pressures. The smaller sector lacked the cushion of the larger ones, and deposits began to migrate towards entities considered too big to fail.

In parallel, the Federal Reserve launched FedNow in July 2023, an instant payment system operational 365 days a year. The temporal coincidence did not go unnoticed: some interpreted it as the prelude to a central bank digital currency, one that promises efficiency and awakens all the ghosts of cash control.

The Collapse That Never Fully Arrived

As months passed, the most catastrophic prediction did not come true. Stock markets recovered, banks continued operating, credit did not freeze entirely. The apocalypse announced in capital letters turned into a scare that few now remember as a real threat. But deposits did not return to their original places, regional banking did not regain its weight, and the next domino piece remains standing.

The conclusion left by the debate: there was no collapse because someone prevented it, not because the problem disappeared. The system's numbers still point to the same issue, with the added complication that the injected liquidity has become routine. The calm after March 2023 is not stability. It's the same tension, presented with better makeup.

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Disclaimer: this article summarizes the ongoing debate about systemic risk and does not constitute financial advice.