Silicon Valley Bank: What is known about the biggest US bank failure since 2008

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US economic experts say they do not believe that the bank’s closure will cause a domino effect similar to the one that led to the 2008 financial crisis. SVB branch closed in Menlo Park, California. Reuters via BBC US authorities announced on Friday (10) the closure of Silicon Valley Bank (SVB), a bank that finances startups. The news of the bankruptcy, the second largest in the US banking sector, caused apprehension among SVB customers who were unable to move the money invested in the bank. The impact of the end of SVB is not yet clear, but specialists in the US economy say they do not believe that the bank’s failure will cause a domino effect similar to the one that led to the financial crisis of 2008. The g1 explains below what is known about the case and what repercussions bankruptcy may have on the US. What happened? How big is the SVB? Has bankruptcy already impacted the market? Will customers have access to the money invested? What happened? The American media reports that one of the factors that resulted in the bankruptcy of SVB is the increase in the US interest rate, which went from 0.25%, in 2020, to 4.75%, in February of this year, in an attempt by the US Central Bank to control inflation. The bank mainly served startups and financiers. As the technology sector began to slow down in recent months, with constant interest rate hikes to curb inflation, companies served by the SVB began to withdraw money faster than expected. In addition to the drop in resources, the SVB also saw new investments dwindle. As a result, the bank ran out of money. To make matters worse, the bank had made a series of investments in the US Treasury and in government-linked government bonds. With the increase in the interest rate, the values ​​of these securities fell. The American press reported that, on Wednesday (6), the SVB announced the sale of several securities at a loss. In an attempt to break even, SVB said it would sell $2.25 billion worth of new shares. However, the announcement caused panic among venture capital firms, causing investors to withdraw money from the bank. On Thursday (9), the bank’s chief executive, Greg Becker, asked customers to remain calm. However, many investors did not trust Becker’s request, and the shares plunged 60%, causing SVB to lose nearly $10 billion, according to Bloomberg. According to the American press, there was a rush among investors to withdraw money from the bank in the last 48 hours, making SVB practically insolvent. How big is the SVB? According to “The Wall Street Journal” this was the second largest bank failure in US history. In addition, the institution is the biggest to fail since the collapse of the American financial system in 2008, which, at the time, generated a global crisis. Silicon Valley Bank had about $209 billion in assets by the end of 2022, making it the 16th largest bank in the US, according to the Federal Reserve – the US central bank. Has bankruptcy already impacted the market? After announcing on Thursday (9) that it was trying to raise US$ 2.25 billion (R$ 11 billion) to cover a loss caused by the sale of assets, SVB shares had their biggest drop, of more than 60%, in one day. 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%. Wall Street indexes fell on Friday, with investors stressed about the health of US banks. The Nasdaq closed down 1.76%. The Dow Jones index fell 1.07%. Will customers have access to the money invested? The Federal Deposit Insurance Corporation (FDIC), which normally protects deposits of up to $250,000, said it had taken control of around $175 billion (about RS900 billion) in deposits held at the bank. 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.

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