Anybody who watches the news or reads the financial press is aware that the Silicon Valley Bank (SVB) collapsed earlier this month. It was a massive news event that sent a shockwave through the banking industry and also provoked major concern among many national governments.
2023 was showing all the signs of being a great year for broker affiliates with plenty of opportunities to earn high commissions promoting online CFD affiliates. Recent events have dented the confidence of some financial analysts. Whenever an event like the collapse of SVB or scandal-ridden crypto exchange FTX occurs, there is a rash of pessimistic financial predictions. Some affiliates are now worried that their profits may take a hit this year.
Hopefully, this blog post will help to put the issues into a clearer perspective and answer many of the questions that we’ve been hearing from worried broker affiliates. Although there is some cause for concern about the impact of SVB’s failure on the markets, the news for affiliates is by no means bad.
Read on for a simple broker affiliates guide to the collapse of the Silicon Valley Bank, and a straightforward analysis of whether its failure will impact online trading in 2023 and future profits for affiliates.
What was the Silicon Valley Bank?
The Silicon Valley Bank was founded in 1983 and located in Santa Clara, California. The commercial bank was launched to provide financial services to a new generation of Silicon Valley startups that required a flexible, non-traditional investment model. The bank prospered and grew rapidly, becoming a pillar of the California financial establishment and an integral part of the Silicon Valley high-tech economy.
SVB was the 16th largest bank in the United States with a considerable presence in other countries. Even immediately prior to its collapse, SVB was well respected internationally. The bank was highly rated by organizations like Forbes and Moody’s Investors Service and controlled assets in excess of $200 billion. On paper at least, the Silicon Valley Bank was a strong, dynamic and dependable financial institution.
The Collapse of the Silicon Valley Bank
SVB astonished the financial markets when it collapsed on 10th March 2023. The simplest explanation for the bank’s failure is that it was caught out by recent interest rate rises that wiped billions off the value of its major investments. At the same time, higher interest rates hit SVB customers by raising their borrowing costs. Clients began withdrawing their deposits to meet interest payments on loans.
The Silicon Valley Bank was pushed into a sequence of reactive financial decisions in an attempt to meet its new liquidity requirements. On March 8th, the bank announced the sale of securities worth $21 billion, new debt of $15 billion and a $2.25 billion emergency sale of treasury stock. These measures might have worked to stabilize the bank, but the news provoked a negative reaction from major Silicon Valley investors.
The result was an old fashioned run on the bank. As a panic reaction set in, frightened SVB clients withdrew an estimated $42 billion in deposits in less than 24 hours. The Silicon Valley Bank couldn’t handle the exodus of capital and went into receivership on the morning of the 10th of March. The rapid collapse of a bank that was considered to be one of the lynch pins of the high tech economy massively undermined confidence in the wider financial system.
Will the Silicon Valley Bank Collapse Damage the Economy?
The collapse of any major bank – particularly one that was integral to the huge Silicon Valley economy – is certainly disastrous news for (almost) everybody involved. It’s also theoretically possible that the SVB disaster is an early warning of a coming financial crisis. There could be a general collapse as the global economy reacts to the pressures of higher interest rates, and an end to cheap money for new investments.
Although many fear a repeat of the financial meltdown of 2007/8 that followed the collapse of the housing bubble, it’s more likely that the collapse of SVB was a localized failure. Despite the worst predictions in the financial media, there probably isn’t a systematic risk to the financial system. The simple reality is that a commercial bank is a business – and any business can fail if the people running it make bad decisions.
The (almost overnight) failure of the prestigious Silicon Valley Bank was certainly a wake up call for the banking system, and for national governments. It has also punctured the complacency of many investors and executives in the high tech sector – which might not be a bad thing in the long-term.
What we haven’t seen since the dramatic failure of SVB is any sustained market downturn. The markets certainly reacted, but didn’t collapse. What we may see in Q2 2023 is greater Fed caution when it comes to further interest rate hikes. Although the Fed believes that the economy is fundamentally strong enough to absorb higher rates, it may prefer to avoid stressing confidence in the banking system for the time being.
Can Broker Affiliates Still Make Money in 2023?
The good news is that there will still be plenty of opportunities for broker affiliates to earn high commissions in 2023. Online CFD brokers like AvaTrade provide a wide range of asset classes and a huge index of financial instruments. Even if we see a downturn on the stock market, we may see an upturn elsewhere.
The failure of SVB mainly affected commercial clients, not ordinary savers, and the public often has short memories when it comes to financial news events. However, if there is some loss of public confidence in the banking system, it may work in the favor of broker affiliates. Just bear in mind that high interest rates reward savers. You’ll need to connect with people who actively want to make money.
If you sense that people are looking for alternative investments, or want to take greater responsibility for their own finances, you can build affiliate marketing campaigns to publicize online trading. Successful broker affiliates are agile enough to adapt to any market conditions and to get in sync with any changes to public mood when it comes to financial institutions.
Generate High Value Content Around the SVB Collapse
Social media and online forums are a great way to keep your finger on the pulse and to get an accurate feeling for trader (and potential trader) sentiment. If you can engage in online debate with traders, you can easily test the water before you launch new campaigns. Events like the collapse of a major bank can create a frenzy of online activity. Everybody has an opinion and everybody has questions. Your role is to feed the debate and drive traffic.
The collapse of SVB is a superb topic for blog and guest posts, and for site content. Even if you’re not currently in a position to publish high quality content about the Silicon Valley Bank, use it as a model for how you’ll react to future events. The next time that a bank collapses or there is a major financial scandal – and there will always be a next time – you’ll recognize it as an opportunity to publish content and gain exposure for your affiliate links.
SVB: Take Away Points for Broker Affiliates
There is an old saying that pride comes before a fall. It may sum up the sudden collapse of SBV very aptly. The collapse of the bank definitely delivered a nasty shock across the financial system and caused some anxiety at government level. So far though, the fallout seems to be contained and investors will not lose their deposits. Nor will the US government directly bail out the bank: SVB is finished.
- Broker affiliates can use the failure of SVB to their advantage and create original content that will drive traffic. The collapse of a bank is a huge news event – use it to your advantage!
- Despite some of the knee jerk predictions that followed the collapse of SVB (and two other banks) there doesn’t seem to be a fundamental threat to the global banking industry. It did unsettle many senior economists and bankers and we may well see a greater level of caution in 2023.
- We may be experiencing a period of readjustment across the global economy as higher interest rates take effect. This will influence trading and investment trends and strategies, but the markets will continue to attract online traders. Governments are unlikely to be seriously deflected from their strategy of raising interest rates to lower inflation.
The bottom line is that the markets and the banking system took a hit on the 10th of March, but not a fatal hit, nor even a crippling one. 2023 still has all the potential to be a highly profitable year for shrewd broker affiliates. If you do want to earn high commissions as an affiliate partner, you need to sign up with a leading partner program. Talk to us today about an individual commission plan for 2023.