‘Cash Burn’ Strategy Threatens Financial Sector

Three banks in the United States have collapsed in just five days.

Their closures are unlikely to have a direct impact on Indonesia, but they offer a valuable lesson that a "cash burn strategy” is threatening the financial sector.

NEW YORK, TUESDAY — The United States is facing its biggest banking crisis since the 2008 financial crisis, following the collapse of Silicon Valley Bank, Signature Bank, and Silvergate. Their closures offer a valuable lesson that a business that relies on a strategy of burning cash and does not have a sound foundation for business will only threaten the financial sector, which can in turn lead to a financial crisis.

Atmajaya Jakarta Catholic University lecturer Agustinus Prasetyantoko said on Tuesday (14/3/2023) that SVB went bankrupt because it carelessly financed a company that lacked prudence. The situation was safe for the moment, because the US central bank, the Federal Reserve (Fed) was disbursing extra cheap funds. The potential for bankruptcy could not be detected early.