Silicon Valley Bank: Regulators take over bank hit by biggest US failure since 2008

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According to banking regulators in California, where the company is headquartered, Silicon Valley Bank faced “inadequate liquidity and insolvency”. SVB branch closed in Menlo Park, California. Reuters via BBC US regulators shut Silicon Valley Bank (SVB) and seized control of customer deposits in the nation’s biggest bank failure since 2008, when Washington Mutual collapsed. The SVB, an important creditor for the area of ​​technology and innovation in health, had difficulty obtaining money to cover the loss with the sale of assets affected by the high interest rate. The problems led to a wave of customer withdrawals. Authorities said they acted to “protect insured depositors”. According to banking regulators in California, where the company is headquartered, Silicon Valley Bank faced “inadequate liquidity and insolvency”. The Federal Deposit Insurance Corporation (FDIC), which normally protects deposits of up to $250,000, said it has taken control of about $175 billion (about $900 billion) in deposits held at the bank, the 16th largest in the US. The bank’s offices and branches are to reopen “by Monday morning” when customers with insured deposits will be able to access funds. Also according to the FDIC, the money obtained from the sale of the bank’s assets will go to uninsured depositors. With many of the customers in this position, companies with money stuck in the bank are worried about their future. “I’m on my way to the agency to get my money now. I tried transferring it yesterday and it didn’t work. You know those times when you might be really screwed but you’re not sure? This is one of them,” the founder of a startup told BBC. Another healthcare startup founder shared, “Literally three days ago, we hit a million dollars in our bank account… And then this happens.” He was able to transfer the money to a different account 40 minutes before the close of trading. “But I know other people who did the same thing minutes after me and couldn’t complete the transfer.” The SVB did not respond to the report’s positioning request. Can the situation spread? The collapse came after SVB announced it was trying to raise $2.25 billion (R$11 billion) to cover a loss caused by the sale of assets, mainly US government bonds, which were affected by higher interest rates. . The news caused investors and customers to flee the bank. The shares had their biggest one-day drop of more than 60% on Thursday (09/03). Concerns that other banks could face similar problems led to widespread selling in bank shares around the world on Thursday and early Friday. Exchanges around the world recorded declines at the end of Friday: the Nasdaq 1.7%, S&P 500 1.4% and Dow Jones 1%. Major European and Asian indexes also closed lower, with the FTSE 100 down 1.6%. Customers trying to access a Silicon Valley Bank branch in New York. Reuters via BBC A key lender to early-stage companies, Silicon Valley Bank is a banking partner for nearly half of US venture-backed technology and healthcare companies listed on stock exchanges last year. The bank, which began in California in 1983, has expanded rapidly over the past decade. It now employs over 8,500 people worldwide, although the majority of its operations are in the US. As well as being a major shock to the tech industry, the SVB’s collapse has raised concerns about the risks faced by other banks as rapid increases in interest rates hit bond markets. Central banks around the world — including the US Federal Reserve and the Bank of England — have raised borrowing costs sharply over the past year, trying to contain inflation. But as rates rise, the value of existing bond portfolios generally declines. These declines mean that many banks are facing significant potential losses. Shares in some of the biggest U.S. banks rebounded on Friday, but smaller banks continued to take a hit — forcing the likes of Signature Bank to halt trading. Alexander Yokum, an analyst at CFRA consultancy, explains that banks specializing in specific sectors are seen as vulnerable to quick withdrawals, such as those that hit the SVB. “Silicon Valley Bank wouldn’t have lost value if it hadn’t run out of cash to provide its customers,” he said. “The thing is, people wanted money and there wasn’t any — what they had was invested, and investment was down.” “I know there is a lot of fear out there, but this problem was definitely specific to this company,” he guaranteed.

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