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Silicon Valley Bank Closes After $209 Billion Asset Loss


On Friday, California regulators closed down Silicon Valley Bank (SVB) and placed it under the control of the US Federal Deposit Insurance Corporation (FDIC).[0] SVB, the 16th largest US bank with some $209 billion in assets, had suffered a 60% plunge in its stock price the previous day, leading to a major slump in its share price.[1] The bank was unable to raise the money it needed, and trading in the stock was halted as it searched for a buyer.[2]

The bank’s failure is the second largest in US history, trailing only that of Washington Mutual in 2008, and the largest of its kind since the 2008 global financial crisis.[3] The bank’s collapse has sparked panic among tech investors and startups, and has raised uncomfortable questions about whether it could undermine the broader banking system and trigger a new meltdown.[4]

SVB had $209 billion in assets as of December 31, 2022.[5] It had disclosed a $1.8 billion loss due to a $21 billion fire sale of its bond portfolio, leading to the need for a $2.25 billion capital raise. The bank was also facing mounting unrealized losses on available-for-sale and held-to-maturity securities that weakened its ability to meet unexpected liquidity needs.[6]

As the FDIC sells the assets of Silicon Valley Bank, uninsured depositors will receive an advance dividend within the next week, as well as a “receivership certificate for the remaining amount of their uninsured funds.”[7]

Billionaire hedge fund manager Bill Ackman called on the US government to step in and bail out Silicon Valley Bank.[8] He said any bailout should protect depositors rather than equity holders or its management, adding, “We should not reward poor risk management or protect shareholders from risks they knowingly assumed.”[8]

Former US Treasury Secretary Larry Summers told Bloomberg News Friday that he saw “no systemic risk” if the situation “is handled reasonably,” adding he had “every reason to think that it will be.”[2] Secretary of the Treasury Janet Yellen told legislators on Capitol Hill Friday the department was aware of recent developments and was monitoring the situation, calling it “a matter of concern” when banks experience losses.[9]

0. “Silicon Valley investors and founders express shock, describe struggles to get money out of SVB” CNBC, 10 Mar. 2023, https://www.cnbc.com/2023/03/10/silicon-valley-investors-and-founders-express-shock-at-svb-collapse.html

1. “Bank Stock Selloff Triggered by SVB Financial Liquidity Crunch” Morningstar, 10 Mar. 2023, https://www.morningstar.com/articles/1143298/bank-stock-selloff-triggered-by-svb-financial-liquidity-crunch

2. “Silicon Valley Bank collapse has echoes of 2008. Here’s why things are different this time” CNN, 10 Mar. 2023, https://www.cnn.com/2023/03/10/investing/svb-banking-crisis-what-next/index.html

3. “SVB collapse highlights $620 billion hole lurking in banks’ balance sheets” Fortune, 10 Mar. 2023, https://fortune.com/2023/03/10/svb-collapse-fdic-takeover-martin-gruenberg-620-billion-hole-banks-balance-sheet

4. “Startups and VCs Scramble to Pay Employees After SVB’s Collapse” The Information, 10 Mar. 2023, https://www.theinformation.com/articles/startups-and-vcs-scramble-to-pay-employees-after-svbs-collapse

5. “What is Silicon Valley Bank? Here’s what to know after sudden collapse” New York Post , 10 Mar. 2023, https://nypost.com/2023/03/10/what-is-silicon-valley-bank-and-why-did-it-suddenly-collapse

6. “Why Silicon Valley Bank’s crisis is rattling America’s biggest banks” Yahoo News, 10 Mar. 2023, https://news.yahoo.com/why-silicon-valley-banks-crisis-is-rattling-americas-biggest-banks-121159393.html

7. “PR-16-2023 3/10/2023” FDIC, 10 Mar. 2023, https://www.fdic.gov/news/press-releases/2023/pr23016.html

8. “Ackman calls on US government to consider Silicon Valley Bank bailout” Business Insider, 10 Mar. 2023, https://www.businessinsider.com/silicon-valley-bank-bill-ackman-billionaire-government-bailout-svb-2023-3

9. “Silicon Valley Bank seized by FDIC as depositors pull cash” Al Jazeera English, 10 Mar. 2023, https://www.aljazeera.com/economy/2023/3/10/silicon-valley-bank-seized-by-fdic-as-depositors-pull-cash

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