Banking regulators of California closed the Silicon Valley Bank (SVB) on March 10 and have appointed Federal Deposit Insurance Corporation (FDIC) to take control of the Bank. The SVB failure is being hailed as the largest banking failure after the 2008 crisis leaving deposits worth billions stranded as investors rushed for withdrawals.
The technology focussed lender’s shares plummeted by over 60% in 2 trading sessions beginning Thursday. The regulators halted trading of the stock on Friday. The impact of the crash dragged several US banking stocks and the global share markets. The SVB had about $209 billion in total assets and $175.4 billion in total deposits as on Dec. 31, 2022, as reported by Reuters.
The bank specializing in tech investments bore the brunt of gloomy financial conditions in the startup sector. The Fed’s rate hikes were directly borne by the lender as they impacted funding in the tech ecosystem. The bank also had to book a loss of $1.8 billion as it was forced to sell its bond portfolio at a loss in its bid to raise capital. The last nail in the hammering was the bank’s failure to raise funds while its deposits were depleting, sending the bank’s stock nose-diving. The FDIC is looking for buyers for the fallen bank and used the proceeds to repay uninsured depositors.
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