United States Closes Silicon Valley Bank In The Worst Financial Collapse Since 2008

On Friday, US regulators shut down Silicon Valley Bank in a dramatic action that sent global banking shares tumbling, as markets worried about possible contagion from America's greatest banking collapse since the 2008 financial crisis.

Once a run on deposits made it impossible for the medium-sized bank to stay viable on its own, US authorities moved in and confiscated SVB's assets. SVB had been a prominent lender to US entrepreneurs since the 1980s.

SVB specialized in startup financing and had grown to become the 16th largest US bank by assets by the end of 2022, with $209 billion in assets and around $175.4 billion in deposits.

Its collapse not only symbolizes the greatest bank failure since Washington Mutual in 2008, but also the second-largest failure for a retail bank in the United States.

SVB's travails have fuelled worries that additional banks may face catastrophe as the repercussions of rising inflation and higher interest rates squeeze weaker institutions. SVB is located in the shadow of the world's largest tech businesses.

On a gloomy day in Santa Clara, California, concerned clients chatted in small groups, asking how they might withdraw their money as word of the federal seizure spread.

One client, who spoke on the condition of anonymity and dressed in a t-shirt and sweatpants, said he used the bank for payroll at his firm.

“It’s not a good situation. A lot of really top tier (venture capital firms) have very high amounts of exposure here,”  he said, adding that he was concerned about his employees.

A day after the four largest American banks' market value plummeted by $52 billion, After hints of turmoil at SVB, European banking titans were equally down, with Deutsche Bank down 10% at one point.

Nonetheless, shares in heavyweights Bank of America, Wells Fargo, and Citibank sawsawed on Wall Street on Friday, with US Treasury Secretary Janet Yellen expressing "concern" about the situation and stating she was "monitoring" a few banks.

The California Department of Financial Protection and Innovation (DFPI) promptly dissolved SVB and selected the Washington-based Federal Deposit Insurance Corporation to take control.

The crisis step protects customers with deposits of up to $250,000 and, more importantly, gives time for the troubled Silicon Valley lender to find a buyer.

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US regulators shut down Silicon Valley Bank

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California Department of Financial Protection and Innovation (DFPI)