Billions of dollars at risk as Silicon Valley Bank collapsestext_fields
New York: Silicon Valley Bank, known as one of the largest lenders to technology start-ups, has reportedly collapsed due to ill-fated decisions, leaving billions of dollars belonging to companies and investors stranded. This collapse is said to be the largest since the 2008 financial crisis in the US.
On Friday, the Federal Deposit Insurance Corporation announced that it would take over Silicon Valley Bank, a 40-year-old institution based in Santa Clara, California. With nearly $175 billion in customer deposits now under the regulator’s control, the bank’s failure is the second-largest in US history and the largest since the 2008 financial crisis.
Despite evoking memories of the global financial panic of the past, this event did not immediately lead to fears of widespread destruction in the financial industry or the global economy.
The downfall of Silicon Valley Bank occurred just two days after it had made emergency moves to handle withdrawal requests and a sharp decline in the value of its investment holdings, which shocked Wall Street and depositors, causing its stock to plummet. A person familiar with the matter stated that the bank had been working with financial advisers until Friday morning to find a buyer.
Although the bank's issues are unique to its circumstances, a financial contagion appeared to spread through parts of the banking sector, causing investors to sell stocks of similar banks that cater to start-up clients and have comparable investment portfolios.
This prompted the halting of trading in shares of at least five banks throughout the day as their steep declines triggered stock exchange volatility limits.
As a result of this situation, Treasury Secretary Janet Yellen publicly reassured investors that the banking system was resilient.