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Silicon Valley Bank (#SVB), which made large investments in cryptocurrency and digital assets, has recently collapsed and its demise has inflicted a major blow to a prominent US bank that catered to numerous technology firms and startups. US authorities seized SVB’s assets on March 10th, 2023, following a large number of depositors pulling out their money due to worries about the bank’s financial health. This case represents the most considerable bank failure in the United States since 2008 and has created turmoil in global financial markets, casting uncertainty on the viability of other banks.
It appears that several factors might have contributed to the SVB’s demise. One of the main causes was the drop in technology stocks over the past year, resulting in the devaluation of SVB’s investments and loans to tech firms. Another factor was the Federal Reserve’s move to raise interest rates in an effort to curb inflation, which resulted in higher borrowing costs for SVB and its clients. Moreover, many startups took out their deposits from the bank to stay afloat in a challenging market for IPOs and fundraising, causing a scarcity of cash for SVB. Consequently, the bank could not pay its financial debts, losing the trust of its customers and creditors.
The Justice Department announced that it is investigating SVB’s collapse and the actions of its senior executives. The investigation is said to be in its early stages and may focus on whether SVB’s leaders engaged in fraud, insider trading or other crimes. Federal law enforcement officials on Tuesday confirmed the investigation into the bank's collapse, and the probe is said to be in its early stages. The Securities and Exchange Commission (SEC) is also probing SVB’s stock sales ahead of its collapse.
See Jeff Pegues, Robert Legare, "Justice Department investigating collapse of Silicon Valley Bank, officials say", CBCNews, March 14, 2023.
Moreover, see:
UK Government, "Government and Bank of England facilitate sale of Silicon Valley Bank UK", March 13, 2023.
Federal Reserve, "Federal Reserve Board announces that Vice Chair for Supervision Michael S. Barr is leading a review of the supervision and regulation of Silicon Valley Bank, in light of its failure", March 13, 2023.
US Department of the Treasury, "Joint Statement by the Department of the Treasury, Federal Reserve, and FDIC", March 12, 2023.
FDIC, "Failed Bank Information for Silicon Valley Bank, Santa Clara, CA", March 10, 2023.
Photo by Mariia Shalabaieva on Unsplash
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