The sudden collapse of Silicon Valley Bank (SVB), which was shut down by US authorities on Friday, sent a wave of panic across the banking sector as markets questioned the consequences of the biggest US bank failure since the financial crisis in 2008 onwards, according to AFP.
Silicon Valley Bank (SVB)Photo: NOAH BERGER / AFP / Profimedia
The bank has been unable to cope with massive withdrawals from its clients, mainly technology companies, and its latest attempts to raise new money have failed.
Therefore, the US authorities officially took possession of the bank and entrusted its management to the US deposit insurance agency (FDIC).
US Treasury Secretary Janet Yellen summoned several financial regulators on Friday to discuss the situation, reminding them she has “full confidence” in their ability to take appropriate action” and saying the banking sector remains “resilient” .
Nervous customers
Little known to the general public, SVB had specialized in financing start-ups and had become the 16th largest American bank by assets: at the end of 2022, it had assets of 209 billion dollars and approximately 175.4 billion dollars in deposits.
Its demise represents not only the largest bank failure since Washington Mutual in 2008, but also the second largest failure of a US retail bank.
Outside the bank’s headquarters in Santa Clara on Friday, a few nervous customers wondered how they would be able to access their funds, some trying to guess what was going on through the closed glass doors. On the door, a paper from the FDIC said they could withdraw up to $250,000 starting Monday.
Panic in the markets began on Thursday after SVB said it was trying to quickly raise capital to deal with massive withdrawals from its clients, losing $1.8 billion from the sale of financial securities.
The announcement surprised investors and reignited fears about the soundness of the entire banking sector, especially as rapidly rising interest rates have driven down the value of bonds in their portfolios and raised the rate at which they borrow.
The four largest US banks lost $52 billion in the stock market on Thursday, and in their wake, Asian and then European banks struggled.