Silicon Valley Bank collapses, in biggest failure since financial crisis

Source: Politico | March 10, 2023 | Sam Sutton and Victoria Guida

The Federal Deposit Insurance Corp. has transferred the bank’s deposits to a new entity in order to protect consumers.

Silicon Valley Bank collapsed on Friday after a run on deposits drove the Northern California institution into insolvency, marking the largest bank failure since the financial crisis.

SVB’s stunning downfall, which threatens to upend the U.S. venture capital industry, is sparking fears that other small and regional banks could face similar pressure amid soaring interest rates and shrinking deposits.

“We are looking at this closure of SVB as a sign of extremely concerning industry conditions,” said Michelle Alt, a former official at the Office of the Comptroller of the Currency, a national bank regulator, and a partner at the advisory firm Klaros Group. “It’s reminiscent of past crises. And what we’re really focused on are banks with unrealized losses.”

Treasury Secretary Janet Yellen and other policymakers are on alert that problems at the institution — which had $209 billion in assets and counted more than half of Silicon Valley-backed startups and health-care businesses among its depositors — could spread.

Yellen told Congress that she was keeping a close eye on the bank’s financial crunch shortly before the California Department of Financial Protection and Innovation announced it had taken possession of the institution Friday morning. The FDIC seized control of the bank’s assets, an unusual move suggesting that immediate action was necessary.

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