Financial Uncertainty Following Collapse of Silicon Valley Bank
On Friday, March 10th, 2023, Silicon Valley Bank, the 16th largest bank in the United States, was shut down by federal regulators after a bank run and customers withdrew $42 billion in deposits. SVB, which was founded in 1983, had $210 billion in assets and was the go-to lender for tech startups that appeared too risky in the eyes of larger, more traditional banks. It serviced nearly half of all US venture-backed startups as of 2021 and was a banking partner for many venture capital firms.
When the bank’s parent company, SVB Financial Group, announced a $2.25 billion share sale after selling $21 billion of securities from its portfolio at a nearly $2 billion loss, it triggered a panic among key venture capital firms and customers. The share price of SVB Financial plunged on Thursday and by Friday morning, trading of the stock was halted and it was reportedly in talks to sell.
The Federal Deposit Insurance Corporation (FDIC) was appointed receiver, and the agencies said Silicon Valley Bank’s depositors would have access to all their money on Monday. The Federal Reserve has announced that it will provide finance to other banks in an effort to increase trust in the banking system and guarantee that all depositors are adequately served.
Treasury Secretary Janet Yellen said Sunday there are no plans for a bailout. She declared on CBS News, “We won’t be doing that again.” Our primary focus is on ensuring that the needs of our depositors are met.
The FDIC will guarantee deposits of up to $250,000, but many startups kept far more than that with the bank. The economic prospects of those who deposited more money than the specified amount in SVB are unknown. The Federal Reserve will provide additional funding to qualified financial institutions on Monday to help deter runs on similar banks.
The collapse of Silicon Valley Bank marks the largest bank failure since the 2008 financial crisis and has created shockwaves in the financial markets and the tech industry. The impact of this failure is far-reaching, with all who banked with SVB potentially facing financial uncertainty. The FDIC is set to make all insured deposits available to customers on Monday, and the Fed is providing additional funding to assure banks have the ability to meet the needs of all their depositors.
0. “Silicon Valley Bank collapse: Treasury, Fed and FDIC announce steps to ensure deposits will be paid in full” ABC News, 12 Mar. 2023, https://abcnews.go.com/Business/silicon-valley-bank-collapse-treasury-fed-fdic-announce/story?id=97807268
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2. “What is Silicon Valley Bank? The bank’s collapse, explained.” Vox.com, 10 Mar. 2023, https://www.vox.com/technology/23634433/silicon-valley-bank-collapse-silvergate-first-republic-fdic
3. “How does a bank collapse in 48 hours? A timeline of the SVB fall” CNN, 11 Mar. 2023, https://www.cnn.com/2023/03/11/business/svb-bank-collapse-explainer-timeline/index.html
4. “Treasury, regulators unveil rescue for bank depositors” POLITICO, 12 Mar. 2023, https://www.politico.com/news/2023/03/12/fdic-holds-auction-for-svb-amid-growing-uncertainty-00086696
5. “Silicon Valley Bank Collapse Becomes Campaign Topic as GOP Warns Against Bailout” The Wall Street Journal, 12 Mar. 2023, https://www.wsj.com/articles/silicon-valley-bank-collapse-becomes-campaign-topic-as-gop-warns-against-bailout-73c97b04