After Silicon Valley Bank Failed, Fears Of A Financial Disaster Arose

The largest financial institution failure since the financial crisis more than a decade ago occurred on Friday as Silicon Valley Bank (SVB) had its assets seized by US regulators. SVB was the 16th largest bank in the country, catering to depositors such as technology workers and venture capital-backed companies. This week, many of its customers withdrew their money due to anxiety over the bank's situation, resulting in the bank's inability to manage the large withdrawals. Despite attempts to raise new funds, the bank ultimately failed. The Federal Deposit Insurance Corporation (FDIC) took control of the bank and its management, as per their responsibility to guarantee deposits. Although it may not be well-known to the public, SVB specialized in financing start-ups and was one of the largest banks in the US, with $209 billion in assets and about $175.4 billion in deposits as of the end of 2022.

Tech Employees Are Becoming More Anxious

Silicon Valley Bank's collapse marks the second-largest retail bank failure in the US since 2008's Washington Mutual collapse. On Friday, US Treasury Secretary Janet Yellen convened financial regulators to discuss the situation, assuring them that she trusted their ability to take appropriate action and emphasizing the banking sector's resilience. Concerned customers gathered outside the Santa Clara headquarters in California, wondering how to access their funds. An FDIC notice advised them to withdraw up to $250,000 (€235,000) starting Monday. Venture capitalists with high deposits expressed concern about the situation, including a start-up boss who feared for his employees' payments. The bank's failure followed the announcement that it had failed to raise capital quickly enough to handle customer withdrawals, despite selling $21 billion (€19.7 billion) of financial securities and suffering a $1.8 billion (€1.7 billion) loss. The development surprised investors and reignited anxieties regarding the stability of the entire banking industry, particularly with the rapid rise in interest rates that is diminishing bonds' worth and elevating credit costs. The four largest US banks lost $52 billion (€49 billion) on the stock market on Thursday, with Asian and European banks struggling as a result.

Outside Of The US, Ripple Effects

European and US banks are facing significant losses following the financial crisis that hit Silicon Valley Bank (SVB), the second-largest retail bank failure in the US since Washington Mutual's demise in 2008. The panic began when SVB announced it needed to raise capital quickly to cope with massive customer withdrawals, but failed to do so, resulting in the sale of $21 billion of financial securities and a loss of $1.8 billion. The news rekindled fears about the soundness of the banking sector, especially with the rapid rise in interest rates, which lowered the value of bonds in their portfolios and increased the cost of credit. While big banks on Wall Street recovered on Friday, mid-sized banks and those focused on one type of customer suffered greater turmoil. Analysts estimate a low risk of a capital or liquidity incident among major banks, but SVB's collapse has created a unique funding pressure for the bank.

As a reminder, WikiBit is ready to help you search the qualifications and reputation of projects in a bid to protect you from hidden dangers in this risky industry!

iOS: t.ly/UUCj

Android: t.ly/cfYt