Two US banks collapse – level 1
Silicon Valley is a US bank. Last week, it fails. It cannot pay people back their deposits.
The Federal Deposit Insurance Corporation insures deposits of up to 250,000 dollars. But the problem is that people have deposits of billions of dollars. They may lose their money. The US president says that people will get their money back and that the US banking system is safe. Shortly after the news, authorities close a bank in New York. Experts say that similar situations will happen again. Banks cannot pay back deposits.
European banks worry. They make tough rules to control the situation. But they already lose 100 billion dollars in one week.
Difficult words: deposit (money which a person or organization has in a bank), insure (to arrange that when a damage or loss happens someone will get money for it), tough (strict or hard).
You can watch the original video in the Level 3 section.
What are the potential long-term effects of the Silicon Valley bank failure on the US and European banking systems?
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