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Collapse of Silicon Valley Bank

Silicon Valley bank is one of the finest financial and commercial bank services in the USA, originated in 1983 by the founders Bill Bigger, Robert Medearis, and Roger smith. Being successful and making a topmost position in the financial and technology hub, this bank came across some gradual loss in their commercial service on Friday, March 10, 2023, making the second largest bank failure in United States history and becoming the largest since the 2008 crisis.

The collapse triggered a crisis for tech startups, which have relied on the Santa Clara-based bank for decades. Silicon Valley investors, executives, and lenders immediately began notified about the potential of mass layoffs and the demise of hundreds of startups.

On Saturday, more than 5,000 startup CEOs and founders pleaded with federal officials for support. Startups worried whether they would be able to pay their employees without access to their funds at Silicon Valley Bank. A bank run divided up a deadly blow to SVB on March 10 forcing its failure after the US Federal Reserve raised interest rates, worrying all the workers and investors from the financial institution best known for its relationships with high-flying technology, startups, and venture capital.

SVB was hit hard by the upside-down turn in technology stocks over the past years as well as the Federal Reserve's aggressive plan to increase interest rates to create a dense boom.

The bank bought billions of dollars worth of bonds using customers' deposits as a typical bank would normally operate. But SVB's Venture funding was drying up real quick and companies were not able to get additional rounds of funding for unprofitable businesses and therefore had to tap their existing funds - often deposited with SVB, which sat in the center of the tech startup universe.

SVB customers were largely wealthy, they likely were more fearful of a bank failure since their deposits were over $250,000, the US government-imposed limit on deposit insurance. Bank regulators had no other choice but to seize SVB's assets to protect the assets and deposits remaining at the bank. At the moment, experts don't expect there to be any issues spreading to the broader banking sector. SVB was large but had a unique existence by servicing nearly exclusively the technology world and VC-backed companies.

However, there might be economic ripple effects, especially in the US tech start-up world, if the money that was deposited at SVB can't be released.


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