California banking regulators have closed Silicon Valley Bank (SVB), a major lender to the technology sector, and seized control of its deposits, the biggest failure of a US bank since 2008, when the global financial crisis began.
Shares in SVB tumbled on Thursday after the bank announced in the evening that it had lost $1.8 billion on the sale of securities to raise funds, which it attributed to a sharp rise in interest rates. Due to the bank’s problems, its users began withdrawing their funds en masse this week, hastening its demise.
At the end of last year, SVB was the 16th largest US bank with approximately $209 billion in assets.
Regulators said they decided to close the bank to protect investors after the bank ran into insufficient liquidity and became insolvent.
The US Federal Deposit Insurance Corporation (FDIC), which normally protects deposits of up to $250,000, said it had taken control of about $175 billion in bank deposits, the BBC reported.
Bank branches will reopen, and customers with insured deposits will have access to funds “on Monday morning at the latest”, they said, adding that the money raised from the sale of the bank’s assets will go to uninsured investors.
An upheaval in world markets
The collapse of the SVB bank has already caused alarm in the global financial markets, where fears have arisen that the collapse of another bank could follow due to similar problems. This week, American banks lost more than a hundred billion in value on the stock exchanges, and European banks another 50 billion.
US Treasury Secretary Janet Yallen announced on Friday that she is closely monitoring developments in the SVB, and later she also met with the highest representatives of banking regulators and expressed her full confidence that they will take appropriate measures in response. At the same time, she asserted that the banking system remains resilient.
The collapse of SVB Bank is the biggest fall of a US bank since the collapse of Washington Mutual in 2008, which triggered the global financial crisis, paralyzing the global economy for several years. Due to the financial crisis at the time in the USA and elsewhere in the world, stricter rules were adopted for the operation of the banking sector.
Source: Rtvslo
