The wheels have come off the American banking system due to the failure of Silicon Valley Bank. This is more significant than the bankruptcy of Lehman Brothers back in 2008.
Lars has previously worried about how liquidity was disappearing from various corners of the global Capital Markets (see 2022-12-07 WILT). This weekend it is the smaller banks being discussed and closely examined. Just wait a few days and weeks for the market discussions to turn to the smaller pension funds that reached for yield in 2018-2022!!
Watch out for a number of smaller banks (outside of the top ten banks by deposits) to have effective bank runs where more than 5-10% of deposits are withdrawn in the next few days. Most banks cannot withstand withdrawals of more than ten (10) percent of their deposits in a short period of time. Quite a number of institutions will be tested if the American public decides as a whole to move their cash balances to larger, well-known financial institutions.
Some people have questioned the risk management practices of Silicon Valley Bank. Yes, there may have been significant mistakes. However, having done that type of job in my professional past, let me state that virtually zero -- zilch -- risk managers run scenarios where approximately 25% of deposits disappear in one day!!