Banks are in the business of leverage, and any bank fears a run. In your opinion, what are the direct causes of the recent liquidity crises of banks in the US and Europe? What are the underlying causes?

Liquidity crises can be triggered by large, negative economic shocks or by normal cyclical changes in the economy. At the root of a liquidity crisis are widespread maturity mismatching among banks and other businesses and a resulting lack of cash and other liquid assets when they are needed. Onerous regulations prevent U.S. commercial banks from effectively deploying their excess capital and ample liquidity. Foreign nations are desperately seeking dollars to buy oil and service their dollar-based debt. Worldwide debt and equity markets have been growing far faster than the capital of "market makers" like banks. ⁵⁶⁹

In addition, for many banks, the larger liquidity buffers introduced post-credit crisis have become the default position with respect to liquidity risk, but there is a fear that widespread quantitative easing may be clouding banks’ views, in which case, some banks will look to hold overly conservative levels of capital to compensate for the inadequacies of their internal systems for managing liquidity. ¹⁴

Source: Conversation with Bing, 2023/3/16(1) Liquidity Crisis: A Lack of Short Term Cash Flow - Investopedia. https://www.investopedia.com/terms/l/liquidity-crisis.asp Accessed 2023/3/16.
(2) Liquidity Crisis and its Impact Explained - Orbex Forex Trading Blog. https://www.orbex.com/blog/en/2020/01/liquidity-crisis-its-impact-explained Accessed 2023/3/16.
(3) Liquidity Shocks: Lessons Learned from the Global Financial Crisis and .... https://www.newyorkfed.org/newsevents/speeches/2021/log210811 Accessed 2023/3/16.
(4) Managing liquidity risk in crisis situations | Wolters Kluwer. https://www.wolterskluwer.com/en/expert-insights/managing-liquidity-risk-in-crisis-situations Accessed 2023/3/16.
(5) Credit Suisse secures US$54 billion lifeline as authorities rush to .... https://www.channelnewsasia.com/business/credit-suisse-secure-54-billion-strengthen-liquidity-swiss-national-bank-crisis-3350776 Accessed 2023/3/16.
(6) Credit Suisse's $54 billion lifeline gives global banks tentative .... https://www.reuters.com/business/finance/credit-suisse-borrow-up-54-bln-it-seeks-calm-investor-fears-2023-03-16/ Accessed 2023/3/16.
(7) Financial shares fall as Credit Suisse becomes latest crisis for the sector. https://www.cnbc.com/2023/03/15/financial-shares-fall-as-credit-suisse-becomes-latest-crisis-for-the-sector.html Accessed 2023/3/16.
(8) The Looming Liquidity Crisis And How To Fix It | Seeking Alpha. https://seekingalpha.com/article/4545938-how-to-fix-the-looming-liquidity-crisis Accessed 2023/3/16.
(9) Liquidity Shocks: Lessons Learned from the Global Financial Crisis and .... https://www.newyorkfed.org/newsevents/speeches/2021/log210811 Accessed 2023/3/16.
(10) Managing the Liquidity Crisis - Harvard Business Review. https://hbr.org/2020/04/managing-the-liquidity-crisis Accessed 2023/3/16.
(11) Liquidity Crisis: A Lack of Short Term Cash Flow - Investopedia. https://www.investopedia.com/terms/l/liquidity-crisis.asp Accessed 2023/3/16.
(12) Managing liquidity risk in crisis situations | Wolters Kluwer. https://www.wolterskluwer.com/en/expert-insights/managing-liquidity-risk-in-crisis-situations Accessed 2023/3/16.
(13) Liquidity Shocks: Lessons Learned from the Global Financial Crisis and .... https://www.newyorkfed.org/newsevents/speeches/2021/log210811 Accessed 2023/3/16.
(14) Liquidity Crisis: A Lack of Short Term Cash Flow - Investopedia. https://www.investopedia.com/terms/l/liquidity-crisis.asp Accessed 2023/3/16.

SVB Financial Group became the largest bank to fail since the 2008 financial crisis on Friday, in a sudden collapse that roiled global markets, left billions of dollars in losses and raised questions about the stability of the US banking system. The collapse of Silicon Valley Bank (SVB) has sent shockwaves through financial and tech circles. ¹²

The underlying causes of the liquidity crises of banks like SVB in the US and Europe are widespread maturity mismatching among banks and other businesses and a resulting lack of cash and other liquid assets when they are needed. Onerous regulations prevent U.S. commercial banks from effectively deploying their excess capital and ample liquidity. Foreign nations are desperately seeking dollars to buy oil and service their dollar-based debt. Worldwide debt and equity markets have been growing far faster than the capital of "market makers" like banks. ⁵⁶⁹

In addition, for many banks, the larger liquidity buffers introduced post-credit crisis have become the default position with respect to liquidity risk, but there is a fear that widespread quantitative easing may be clouding banks’ views, in which case, some banks will look to hold overly conservative levels of capital to compensate for the inadequacies of their internal systems for managing liquidity.

Source: Conversation with Bing, 2023/3/16 (1) Why did Silicon Valley Bank fail and is a financial crisis next?. Https://www. Aljazeera. Com/economy/2023/3/14/why-did-silicon-valley-bank-fail-and-is-a-financial-crisis-next Accessed 2023/3/16.
(2) SVB is largest bank failure since 2008 financial crisis | Reuters. Https://www. Reuters. Com/business/finance/global-markets-banks-wrapup-1-2023-03-10/ Accessed 2023/3/16.
(3) SVB is largest bank failure since 2008 financial crisis | Reuters. Https://www. Reuters. Com/business/finance/global-markets-banks-wrapup-1-2023-03-10/ Accessed 2023/3/16.
(4) The facts on Trump's 2018 loosening of regulations on banks like SVB .... Https://www. Cnn. Com/2023/03/14/politics/facts-on-trump-2018-banking-deregulation/index. Html Accessed 2023/3/16.
(5) The facts on Trump's 2018 loosening of regulations on banks like SVB .... Https://www. Cnn. Com/2023/03/14/politics/facts-on-trump-2018-banking-deregulation/index. Html Accessed 2023/3/16.
(6) The facts on Trump's 2018 loosening of regulations on banks like SVB .... Https://www. Cnn. Com/2023/03/14/politics/facts-on-trump-2018-banking-deregulation/index. Html Accessed 2023/3/16.
(7) Why did Silicon Valley Bank fail and is a financial crisis next?. Https://www. Aljazeera. Com/economy/2023/3/14/why-did-silicon-valley-bank-fail-and-is-a-financial-crisis-next Accessed 2023/3/16.
(8) Why did Silicon Valley Bank fail and is a financial crisis next?. Https://www. Aljazeera. Com/economy/2023/3/14/why-did-silicon-valley-bank-fail-and-is-a-financial-crisis-next Accessed 2023/3/16.
(9) SVB is largest bank failure since 2008 financial crisis | Reuters. Https://www. Reuters. Com/business/finance/global-markets-banks-wrapup-1-2023-03-10/ Accessed 2023/3/16.