Silicon Valley Bank Collapse: Biggest US Bank Failure Since 2008 Financial Crisis
Silicon Valley Bank, an iconic lender to the tech sector, collapsed on Friday, March 10th, 2023, in what is now the largest US bank failure since the 2008 financial crisis. The California Department of Financial Protection and Innovation and the Federal Deposit Insurance Corporation (FDIC) took over the bank's deposits and assets.[0]
The bank’s sudden collapse has left tech investors and startups scrambling to figure out their financial exposure to the bank and left founders worrying about getting their money out, making payroll and covering operating expenses.[1] All insured depositors will have full access to their insured deposits no later than Monday morning, according to the FDIC.[2] Uninsured depositors will receive an “advance dividend within the next week.” within the course of the coming week.[3]
The Federal Deposit Insurance Corporation (FDIC) declared that individuals with insured deposits of up to $250,000 at SVB will have access to their funds by Monday at the latest.[4] But reports indicate many of SVB’s customers – typically steeped in the tech startup world and usually having boatloads of assets deposited – may have far more than that, which may be lost when the dust settles.[5]
The selloff of shares came after the company said it would sell more shares to cover a $1.8 billion loss it incurred after completing a $21 billion fire sale of its bond portfolio. This was prompted by the heightened fears of contagion effects from financial distress at both Silicon Valley Bank and Silvergate Capital.[6]
The failure of Silicon Valley Bank marks the worst U.S. financial institution failure since the Great Recession. The bank had $209 billion in total assets at the end of last year and had become a centerpiece of finance in the tech industry, particularly for startups and the venture capitalists who invest in them.[7]
The meltdown of Silicon Valley Bank has sent shockwaves through the financial markets and the tech industry and led many tech leaders to urge companies to not panic or withdraw their money. The risk for these startups was too great, and this led to a self-fulfilling bank run.[8]
Prominent venture capitalists advised their tech startups to withdraw money from Silicon Valley Bank while large institutions such as JP Morgan Chase & Co sought to convince some SVB customers to move their funds Thursday by touting the safety of their assets.[9]
Speculation is now occurring amongst traders as to which lender will be the next to suffer.[9] Meanwhile, crypto-focused lender Silvergate said it will write off its assets and close down Wednesday.[6]
0. “Silicon Valley Bank – The Aftermath. Which Companies Were Impacted?” TipRanks, 12 Mar. 2023, https://www.tipranks.com/news/silicon-valley-bank-the-aftermath-of-the-closure-and-impacted-companies
1. “Camp toy store pleads for help after Silicon Valley Bank collapse” CNN, 11 Mar. 2023, https://www.cnn.com/2023/03/10/business/camp-toy-store-svb-bank/index.html
2. “PR-16-2023 3/10/2023” FDIC, 10 Mar. 2023, https://www.fdic.gov/news/press-releases/2023/pr23016.html
3. “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
4. “What to know about the spectacular collapse of Silicon Valley Bank” NPR, 10 Mar. 2023, https://www.npr.org/2023/03/10/1162599556/silicon-valley-bank-collapse-failure-fdic-regulators-run-on-bank
5. “FDIC's Takeover of SVB Sparks Bank Runs, BoA & Wells Fargo Fears” TMZ, 11 Mar. 2023, https://www.tmz.com/2023/03/11/fdic-takeover-silicon-valley-bank-run-svb-boa-wells-fargo-deposit
6. “Wall Street banks including JPMorgan, Bank of America see $55B value wipeout” Markets Insider, 10 Mar. 2023, https://markets.businessinsider.com/news/stocks/jpmorgan-bank-of-america-biggest-banks-market-cap-value-wipeout-2023-3
7. “Billionaire Bill Ackman on SVB collapse: Government has 48 hours to fix ‘irreversible mistake'” Fox Business, 12 Mar. 2023, https://www.foxbusiness.com/markets/billionaire-bill-ackman-svb-collapse-government-has-48-hours-fix-irreversible-mistake
8. “Most of Silicon Valley Bank's Deposits Were Uninsured” TIME, 10 Mar. 2023, https://time.com/6262009/silicon-valley-bank-deposit-insurance/
9. “Why Is the US Regulating JPMorgan But Not SVB?” Bloomberg, 10 Mar. 2023, https://www.bloomberg.com/opinion/articles/2023-03-10/banking-why-is-the-us-regulating-jpmorgan-but-not-svb
