US authorities swooped in and seized the assets of SVB, a major lender to American startups since the 1980s, after running out of deposits it was no longer possible for the medium-sized bank to survive on its own.
Little known to the general public, SVB specialized in startup funding and has become the 16th largest US bank by assets: at the end of 2022, it had US$209 billion in assets and approximately US$175.4 billion The deposit was
Its demise not only represented the largest bank failure since Washington Mutual in 2008, but also the second largest ever for a retail bank in the United States.
Based in the shadow of the world’s biggest tech companies, SVB’s woes have raised fears that more banks could face doom as high inflation and rising interest rates squeeze vulnerable lenders.
In front of the SVB headquarters on a rainy day in Santa Clara, California, panicked customers huddled in small groups and wondered how they might get their money out as news of the government seizure spread.
One customer, dressed in a T-shirt and sweatpants, said on condition of anonymity that he used the bank for payroll at his startup.
“It’s not a good situation. A lot of the top tier (venture capital firms) have a lot of exposure here,” he said, adding that he was concerned for his employees.
European banking giants were similarly pushed into the red, with Deutsche Bank down 10 per cent at one stage, a day after the market value of the four biggest US banks plummeted US$52 billion following signs of trouble at SVB. had come
But shares in heavyweights Bank of America, Wells Fargo and Citibank seesawed on Wall Street on Friday, after US Treasury Secretary Janet Yellen expressed “concern” about the situation and said she was “monitoring” some banks.
Soon after came news that California’s Department of Financial Protection and Innovation (DFPI) had shut down SVB and appointed the Washington-based Federal Deposit Insurance Corporation to take it over.
The crisis measure protects customers with deposits of up to US$250,000 and significantly buys time to find a potential buyer for whatever is left of the troubled Silicon Valley lender.
CNBC reported Friday that SVB was in talks with potential buyers after efforts to resolve the crisis on its own failed.
Patrick O’Hare of Briefing.com said, “Today’s debate is whether the SVB issues are SVB issues or the start of a bigger issue for the banking sector.”
“There seems to be an allowance for the stock market not to have a company-specific problem or at least a weak systemic problem.”
Trading in SVB was halted on Friday after the bank saw more than 60 percent of its value wiped off before the closure, following disclosure it had lost $1.8 billion in the sale of securities in an effort to raise funds.
Investors fear other banks could face similar losses as they try to raise cash amid steadily rising interest rates as the central bank moves aggressively to tame decades-high inflation. are increasing.
“We’ll have to see how this story develops but something always gets tricky during or after a Fed hiking cycle,” Deutsche Bank analysts said in a note.
“Is this another mini-falter on this front or the start of something bigger? It’s hard to tell, but I’d be stunned if there weren’t many more casualties of this boom-and-bust cycle.” – AFP