US, European banking systems are at serious risk due to rising interest rates

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• Lehman failed since it had losses on bad investments and did not have sufficient capital.

• Credit Suisse on the other hand was stable and had sufficient capital.

• due to a run on its deposits caused by fear and panic of its depositor

• ailed to change the sentiment and the bank faced outflows of more than $122bn within three months.

• provide liquidity of $100bn to UBS for support

• sentiment of markets is so weak that even a relatively stable bank

• Deutsche Bank in Germany could face a similar crisis.

• First Republic Bank has seen outflows of $70bn (40 per cent of its total deposits) and PacWest has lost a fifth of its deposits

• small banks in the US have seen a total of $190bn and large banks have seen outflows of $23bn.

• The primary trigger for the banking crisis is the rise in US interest rat

• who were suffering from an outflow of capital towards the US dolla

• unintended and unexpected casualty.

• holdings in US government bonds.

• The sharp rise in interest rates means that the prices of these bonds have fallen substantially.

• the bank is forced to sell these bonds and incur a loss.

• also now valued at prices far lower than what they paid for.

• real estate are illiquid

• which essentially made the bank insolvent.

• S banks have unrealised losses of over $620bn due to investments in low yielding government bonds.

• peaked and are expected to further increase by at least another 25 basis points to 5.25pc