So the bank was sitting on a mountain of unrealized losses in bonds just as the pace of customer withdrawals was escalating.Īn SVB Financial Group chart displayed on the floor of the New York Stock Exchange in New York, US, on Friday, March 10, 2023. SVB’s $21 billion bond portfolio was yielding an average of 1.79% - the current 10-year Treasury yield is about 3.9%.Īt the same time, venture capital began drying up, forcing startups to draw down funds held by SVB. Higher interest rates also eroded the value of long-term bonds that SVB and other banks gobbled up during the era of ultra-low, near-zero interest rates. The Fed moved aggressively, and higher borrowing costs sapped the momentum of tech stocks that had benefited SVB. Several forces collided to take down the banker.įirst, there was the Federal Reserve, which began raising interest rates a year ago to tame inflation. The longer version is a bit more complicated. In short, SVB encountered a classic run on the bank. While relatively unknown outside of Silicon Valley, SVB was among the top 20 American commercial banks, with $209 billion in total assets at the end of last year, according to the FDIC. It provided financing for almost half of US venture-backed technology and health care companies. Here’s what we know about the bank’s downfall, and what might come next.įounded in 1983, SVB specialized in banking for tech startups. It was the largest failure of a US bank since Washington Mutual in 2008. Silicon Valley Bank, facing a sudden bank run and capital crisis, collapsed Friday morning and was taken over by federal regulators. Takeaways from America's second-largest bank failure Prior to being shut down by regulators, shares of SVB were halted Friday morning after falling more than 60% in premarket trading following a 60% declined on Thursday when the bank sold off a portfolio of US Treasuries and $1.75 billion in shares to cover declining customer deposits. Silicon Valley Bank was shut down on Friday morning by California regulators and was put in control of the U.S. People line up outside of the shuttered Silicon Valley Bank (SVB) headquarters on Main Santa Clara, California.
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