Silicon Valley Bank became the largest US bank to fail since the 2008 financial crisis, stranding billions of assets belonging to businesses, investors, and depositors. Here’s all you need to know.
Before the shutdown, Silicon Valley Bank was the nation’s 16th biggest lender, and its demise has had a significant influence on the tech industry, as it was a major backer of tech firms. Hundreds of businesses, including retailer Camp and coffee producer Compass Coffee, have been impacted by the outage since they cannot access their deposits.
The Federal Reserve’s aggressive interest rate rises over the last year had a substantial influence on the start-up industry, in which Silicon Valley Bank played a big part. The bank’s capacity to satisfy withdrawal demands was impeded by high interest rates and tight financial circumstances. In addition, the bank lost $1.8 billion on Treasury bonds that were devalued as a result of the Fed’s rate rises.
Key Takeaways
- Silicon Valley Bank was closed down by US authorities on Friday.
- It is the worst bank collapse in the United States since the 2008 financial crisis.
- The failure of SVB caused a drop in global banking and financial equities.
- Silicon Valley Bank (SVB) has collapsed, leaving many companies in the startup and tech sector worried about whether they’ll be able to make payroll this week
Global banking and financial stocks plummeted on Friday as US authorities shut down SVB Financial Group, a US-based commercial lender, following an accelerated fall in its shares that resulted in a market loss of more than $80 billion.
Silicon Valley Bank became the largest US bank to fail since the 2008 financial crisis, stranding billions of assets belonging to businesses, investors, and depositors.
The SVB crisis erupted in barely 48 hours, after the bank’s statement that it planned to raise more than $2 billion to repair balance-sheet holes. This caused considerable concern among its clients and depositors, as well as a major selloff.
When investor and depositor concern rose, SVB was compelled to abandon its fundraising strategy, but the harm had already been done.
What happens to Silicon Valley Bank depositors?
It is yet to be determined. Just around 15% of accounts are reported to be under the FDIC limit, which means that 85% of accounts are at danger. Yet, it is thought that there are adequate assets to cover all of these accounts.
It’s only a matter of time.
That’s hardly much consolation for businesses worried about making payment this week, and we may see a larger bank come in to take over the remainder of SVB, or some type of short-term government assistance.
This is a fast-moving story, and more material is expected to be disclosed on Sunday evening or Monday morning.
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