Silicon Valley Bank Goes Bankrupt

Silicon Valley Bank, one of the most renowned banks in the United States, was forced to close by state and federal bank authorities on March 10, 2023. The bank’s fall is the greatest bank failure in the country since the 2008 collapse of Lehman Brothers, with total assets of $209 billion and total deposits of $175.4 billion. Silicon Valley Bank was vital to the venture capital (VC) ecosystem, serving VC companies and start-ups.

Unfortunately, when the economy deteriorated, the corporations that sponsored the VCs ran out of cash, and the VC funding dried up. Deposits at Silicon Valley banks fell quicker than projected as a result.

After Silicon Valley Bank’s statement on Wednesday that it planned to sell $21 billion in securities at a $1.8 billion loss and issue $2.25 billion in new shares, many of the bank’s remaining clients cashed out. Customers began to withdraw more money since the rate of deposit outflows made any arrangement harder. More than 90% of Silicon Valley Bank’s deposits were uninsured, according to recent records.

On Thursday, Goldman Sachs executives agreed to sell shares for $95 a share, but the deal fell as the bank’s price continued to tumble. Several firms who attempted to withdraw funds on Thursday reported that their transfers had gone wrong, raising fears for certain tech and biotech start-ups that still had money in the bank.

After the bank was closed, the FDIC established a new Deposit Insurance National Bank of Santa Clara (DINB) and transferred all insured deposits to it. Uninsured depositors will be issued a trustee’s certificate for the amount of their uninsured balance.

Silicon Valley Bank’s bankruptcy severely blows the American financial system, particularly the venture capital industry. It also emphasises the significance of proper capital and risk management techniques, especially during economic instability. The failure of a big bank can have far-reaching implications. Hence proper protections must be in place to prevent such failures from occurring.

Vishak
Vishak
Vishak is a skilled Content Editor at TechLog360 with a passion for technology. He has a keen eye for the latest trends and advancements in the field of technology. He specializes in creating engaging and informative content on a range of technology-related topics, including the latest hardware news, app reviews, games, smartphones, and much more. He stays up to date with the latest news and breakthroughs in these areas and delivers insightful articles and blog posts that help readers stay informed and engaged.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

More from this stream