• Silicon Valley Bank (SVB) has been shut down by the U.S. Federal Deposit Insurance Corporation (FDIC) after its collapse on Friday, making it the largest U.S. bank failure since 2008.
• Various alleged catalysts have been pointed to, such as venture capitalists causing a bank run and the U.S. Federal Reserve’s rate hikes.
• Silvergate Bank and SVB’s collapses have prompted calls for SVB intervention and market observers predict larger financial collapse in the U.S.
The recent collapse of Silicon Valley Bank (SVB) has sent shock waves throughout the financial industry. On Friday, the U.S. Federal Deposit Insurance Corporation (FDIC) shut down SVB, making it the largest U.S. bank failure since 2008. This event has sparked finger-pointing and concerns of contagion, as various alleged catalysts have been pointed to.
Venture capitalists have been blamed for causing a bank run, as the bank was well-known for banking tech startups and venture-backed companies. SVB had a high concentration of deposits from these companies, which may have caused customers to withdraw their deposits. Additionally, the U.S. Federal Reserve’s rate hikes have been blamed for SVB’s collapse, as the bank was unable to access funds at a low interest rate. Economist and gold bug Peter Schiff has also warned of more trouble ahead for the U.S. banking system.
The collapses of Silvergate Bank and SVB have prompted calls for SVB intervention, as many fear the repercussions of the bank’s failure. Market observers predict a larger financial collapse in the U.S., as SVB held $175.4 billion in deposits at the end of December 2022. Customers attempted to remove $42 billion from the bank on Thursday alone, indicating a rapid decline in funds. The bank attempted to strengthen its balance sheet by announcing the need to raise $2.25 billion, and the sale of its available-for-sale (AFS) bond portfolio for $21 billion, resulting in a $1.8 billion loss.
All eyes are on the SVB collapse and its potential to bring about contagion in the financial industry. As the U.S. banking system continues to experience trouble, the FDIC has been forced to take action and shut down the failing bank. Market observers have warned of further trouble ahead, prompting calls for more intervention. Only time will tell if the SVB collapse will cause larger financial repercussions.