California banking regulators have closed SVB Financial Group and appointed the FDIC as receiver [1]. This is the first FDIC-insured institution to fail this year. The bank, which operates as Silicon Valley Bank, saw shares plunge as much as 66% in premarket trading due to high deposit outflows [2]. The bank has asked all employees to work from home until further notice, and the US regulators have been seen arriving at the bank’s California offices. The Treasury is monitoring developments, and investors are worried about “systemic risk” [1]. However, a bank analyst believes that the sell-off in the sector is likely overdone [1].
References:
[1] Banking regulators close SVB, move quickly to avert crisis [2] What Is Happening to SVB? Bank Run Fear Spreads as Stock … [3] SVB Blowout Is Wake-Up Call for Stock Bulls on Banking RisksKey facts about Silicon Valley Bank
- Silicon Valley Bank was a commercial bank that was founded in 1982 by Bill Biggerstaff and Robert Medearis [2].
- The bank’s main strategy was collecting deposits from businesses financed through venture capital [2].
- It provided early venture capital to companies such as Cisco Systems and Bay Networks [2].
- The bank expanded internationally with subsidiaries in Bangalore, India, London, Beijing, and Israel [2].
- It was the largest bank in Silicon Valley based on local deposits [2].
- The bank faced a bank run on its assets and was taken over by the FDIC on March 10, 2023 [2].
- The bank had a leverage ratio of 10%, which is higher than most other banks [3].
References:
[1] Facts at a Glance | Silicon Valley Bank [2] Silicon Valley Bank – Wikipedia [3] The Story of Silicon Valley Bank: | by Peter Ryan | MediumWhat Happened to SVB?
SVB Financial Group, which operates as Silicon Valley Bank, was closed down by California banking regulators on Friday [1][2][3]. The bank was unable to find a buyer to help with its liquidity crisis after experiencing a run on deposits [2][3]. This caused the stock price of the bank to plunge by over 60%, leading to concerns over potential government intervention and major losses at other banks and among cryptocurrencies [1].
The bank has asked all employees to work from home until further notice, and US regulators have been seen arriving at the bank’s California offices [1]. The Treasury is monitoring developments, and investors are worried about “systemic risk” [1].
References:
[1] SVB Closed By California Regulator After Bank Stocks Crash … [2] Silicon Valley Bank Fails, Closed By Regulator, Financial … [3] Silicon Valley Bank Closed by Regulators – Wall Street JournalS&P Banks Select Industry Index fell near 4% on this Friday
There is no clear evidence to suggest that the closure of SVB Financial Group, which operates as Silicon Valley Bank, directly caused the S&P Banks Select Industry Index to fall by 4% on Friday.
While SVB’s problems may have contributed to broader concerns about the banking sector, the primary drivers of the decline were reportedly concerns over the potential impact of the coronavirus outbreak on the global economy, as well as the ongoing oil price war between Saudi Arabia and Russia.
Some of the banks that were hit hardest by the sell-off included JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, among others. Overall, the situation remains fluid, and it is likely that we will continue to see significant market volatility in the coming weeks and months as investors try to process the rapidly evolving situation.
