On Wednesday, Silicon Valley Bank (SVB) reported a $1.8 billion loss from the sale of U.S. treasuries and mortgage-backed securities.[0] This prompted a rapid decline in the bank’s stock price and a run on deposits. By Friday, regulators had taken control of the company, making it the second-largest bank failure in U.S. history.[1]
Founded in 1983, Silicon Valley Bank provided financing for almost half of US venture-backed technology and health care companies.[2] The bank had long served as a financial pillar of the startup world, and was highly respected for its close relationship with tech entrepreneurs.[3]
SVB was compelled to liquidate assets and incur a $1.8 billion loss due to the withdrawal of deposits. The bank explained this decision by saying that higher interest rates, stressed public and private markets, as well as the high level of resources that its customers are using to finance their companies, were expected.[4] Shares dropped by over 60% on Thursday.[5]
The US Federal Deposit Insurance Corporation (FDIC) was appointed as receiver and said all insured depositors will have full access to their insured deposits no later than Monday morning. The company stated that it would be providing uninsured depositors with an “advance dividend” within the coming week.[6]
The Federal Deposit Insurance Corporation (FDIC), an independent government agency responsible for guaranteeing bank deposits and regulating financial institutions, has promised that all insured depositors will have full access to their insured deposits by Monday morning at the latest.
The troubles at SVB and Silvergate, a crypto-friendly bank that announced plans to shut down this week, have sparked fears of contagion effects across the entire sector. Wall Street analysts, however, say SVB Financial issues are unlikely to spread to other banks.[7]
On Friday, the US Federal Deposit Insurance Corporation assumed control of Silicon Valley Bank, concluding an astonishing 48-hour span of time in which worries of a lack of liquidity at the company caused some startups to consider withdrawing their money.[8] SVB’s failure “could destroy an important long-term driver of the economy as VC-backed companies rely on SVB for loans and holding their operating cash,” said Bill Ackman, CEO of Pershing Square Capital Management, in a series of tweets on Thursday.[9]
The bank’s collapse had been precipitated by Federal Reserve policies since the 2008 crash, but was accelerated by the pace and amount of interest rate increases.[7]
0. “Silicon Valley Bank: What you need to know as the crisis sparks stock market chaos” Markets Insider, 10 Mar. 2023, https://markets.businessinsider.com/news/stocks/svb-silicon-valley-bank-collapse-jpmorgan-morgan-stanley-bank-stocks-2023-3
1. “Here’s how much of your bank deposits are FDIC protected” The Washington Post, 11 Mar. 2023, https://www.washingtonpost.com/business/2023/03/10/faq-fdic-insurance
2. “Opinion | Silicon Valley Bank’s collapse reflects the tech sector’s deep anxiety” The Washington Post, 11 Mar. 2023, https://www.washingtonpost.com/opinions/2023/03/10/silicon-valley-bank-collapse-tech-sector/
3. “Most of Silicon Valley Bank’s Deposits Were Uninsured” TIME, 10 Mar. 2023, https://time.com/6262009/silicon-valley-bank-deposit-insurance/
4. “Silicon Valley Bank failure raises fear of broader financial contagion” The Washington Post, 11 Mar. 2023, https://www.washingtonpost.com/us-policy/2023/03/10/silicon-valley-bank-failure-financial-industry/
5. “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
6. “Takeaways from America’s second-largest bank failure” CNN, 11 Mar. 2023, https://www.cnn.com/2023/03/11/business/svb-collapse-roundup-takeaways/index.html
7. “SVB failure doesn’t threaten ‘safety and soundness’ of banking system: Analyst” Yahoo News, 10 Mar. 2023, https://news.yahoo.com/svb-failure-doesnt-threaten-safety-and-soundness-of-banking-system-analyst-210627755.html
8. “Use code ‘Bankrun’: Camp toy store pleads for help after Silicon Valley Bank collapse” CNN, 10 Mar. 2023, https://www.cnn.com/2023/03/10/business/camp-toy-store-svb-bank/index.html
9. “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