US shuts down Silicon Valley banks in biggest collapse since 2008
California-based Silicon Valley Bank (SVB), the 16th largest bank in the United States, was closed on 9 March by the California Department of Financial Protection and Innovation.
An overview of the news
It is the biggest banking failure since the 2008 financial crisis.
It is considered the biggest financial crisis since the collapse of Washington Mutual and Lehman Brothers during the 2008 recession.
The regulator appointed the Federal Deposit Insurance Corp. as the receiver.
As of December 31, 2022, the Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits.
The FDIC created a new bank, the National Bank of Santa Clara, to hold the failed bank's deposits and other assets. The new entity began operating.
Why did SVB have to be shut down?
SVB announced the sale of securities worth $21 billion from its portfolio.
The company said that to strengthen its financial position, shares worth $ 2.25 billion are being sold.
The widespread slowdown in the startup industry led to high deposit withdrawals in the bank, resulting in the move.
The increase in interest rates by the Federal Deposit Insurance Corp also messed up SVB Bank's math.
Experts believe that the biggest reason for the closure of SVB was the simultaneous withdrawal of money from the bank by its investors.
About Silicon Valley banks
It was established in 1983, it was the 16th largest bank in America.
It primarily invested in Silicon Valley based startups and provided banking related services.
It provided a range of services toventure capital and private equity firms, as well as private banking services to high net-worth individuals.
The firm had a deal with half of all venture-backed startups in the US in 2022.
As of December 31, 2022, the bank had close to $212 billion in assets with clients such as Shopify, Pinterest, VC firm Andreessen Horowitz, Crowdstrike and Teladoc Health.
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