US regulators have taken over Silicon Valley Bank.

(Bloomberg)

[Financial Channel/Comprehensive Report] After the parent company of Silicon Valley Bank, SVB Financial Group (SVB), revealed huge losses and failed to increase its capital, it was declared bankrupt and taken over by the U.S. regulator, and this process took place within 48 hours happened within, ending about 40 years of service at Silicon Valley Bank.

"CNBC" reported that Silicon Valley Bank mainly serves technology, venture capital, and start-up companies. It was still a well-capitalized bank on Wednesday (8th) and sought to raise some funds, but the US regulator closed it on Friday (10th). The acquisition of Silicon Valley Bank and the seizure of its deposits is the largest bank failure in the United States since the 2008 financial crisis and the second largest bank failure in US history.

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The whole incident started late Wednesday when Silicon Valley Bank announced that it needed to raise US$2.25 billion (approximately NT$70.031 billion) to make up for losses in bond investments, triggering panic in the market.

The reason why Silicon Valley Bank needs to raise funds is from the market chaos caused by rising interest rates. As major customers such as start-up companies have withdrawn deposits to maintain operations, Silicon Valley Bank found itself short of funds and was forced to sell bonds at a loss. The investment loss was as high as US$1.8 billion (approximately NT$56.025 billion).

According to data from U.S. regulators, customers of Silicon Valley Bank tried to withdraw US$42 billion (approximately NT$1.307 trillion) from the bank on Thursday, but as of the close of the day, the cash balance of Silicon Valley Bank was negative US$958 million (approximately NT$29.817 billion). Taiwan dollars), and cannot obtain sufficient collateral from other channels.

While some Silicon Valley Bank customers were still receiving emails on Thursday night reassuring the bank that it was "business as usual," SVB's stock price continued to fall before the market opened on Friday, and the bank eventually gave up selling shares and collapsed.

Ryan Falvey of fintech firm Restive Ventures said it was a VC-fueled hysterical bank run, citing the high relevance of the tech investing community as a key reason for Silicon Valley Bank's sudden collapse.

Prominent venture capital funds, including Union Square Ventures and Coatue Management, have in recent days advised their portfolio companies to divert capital from Silicon Valley banks.

California financial regulators said the sudden withdrawal of deposits by customers left Silicon Valley Bank unable to repay debts as they came due, leaving it insolvent.

As of the end of 2022, Silicon Valley Bank's total assets will be approximately US$209 billion (approximately NT$6.505 trillion), and total deposits will be approximately US$175.4 billion (approximately NT$5.459 trillion).

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