The rapid collapse of Silicon Valley Bank sent shockwaves through the US economic system over the weekend, leaving many wondering how the country’s Sixteenth-largest lender, which catered to hundreds of revolutionary tech start-ups, could fail so spectacularly.
Per week ago, SVB had $209 billion in assets under management. Its collapse qualifies as the second largest bank collapse in US history.
COVID pandemic
The bank’s collapse may be traced back to the early days of the coronavirus pandemic, when the Federal Reserve kept rates of interest near zero to stimulate growth during a period of severe economic downturn.
The tech sector benefited greatly from the low cost money that was floating around and fueling sky-high valuations that analysts warned can have been exaggerated.
The SVB was one of the important beneficiaries of the bonanza. In 2021, enterprise capital-backed start-ups raised a staggering $330 billion – double the amount from the previous 12 months.
In only one 12 months, SVB has seen a 100% increase in the amount of money deposited in its accounts.
![The Silicon Valley bank, the 16th largest in the country, collapsed on Friday.](https://nypost.com/wp-content/uploads/sites/2/2023/03/NYPICHPDPICT000008206017.jpg?w=1024)
![The collapse of SVB is the second largest bank failure in US history.](https://nypost.com/wp-content/uploads/sites/2/2023/03/NYPICHPDPICT000008205806.jpg?w=1024)
In 2018, SVB had $49 billion in deposits. By the end of 2020, that number had doubled to $102 billion. In 2021, the bank held $189.2 billion.
By the end of 2022, that number had fallen barely to $175.4 billion as customers were hit by a weak initial public offering market. Recently, greater than 90% of the bank’s deposits exceeded the federal insurance threshold of $250,000.
SVB invested money in long-term securities and mortgage-backed bonds with a better yield. But when the Fed raised rates of interest, the value of these investments plummeted.
Given declining revenues in the tech sector in recent months, the bank has struggled to plug the hole in its balance sheet.
November 2022
JPMorgan has warned that Silicon Valley Bank’s “unrealized losses of $16 billion” could pose a big risk, in accordance with an analyst report reviewed by The Post.
![Greg Beck, the CEO of SVB, sold $3.6 million worth of company stock in the weeks before the bank imploded.](https://nypost.com/wp-content/uploads/sites/2/2023/03/NYPICHPDPICT000008019029-1.jpg?w=1024)
February 27, 2023
Greg Becker, CEO of SVB, sold $3.6 million price of the company’s shares lower than two weeks before revealing the extent of the losses.
Becker sold 12,451 shares – the first time in over a 12 months that a CEO has sold shares in parent company SVB Financial Group, in step with regulatory documents.
Goldman Sachs was hired
Moody’s Investors Service, a risk management agency, told SVB management it was preparing to downgrade its credit standing.
The Moody’s notice forced SVB to approach Wall Street investment giant Goldman Sachs in hopes of devising a plan to lift capital and reassure investors who were terrified of liquidity concerns, in accordance with Insider.
March 8
Goldman’s efforts failed – they usually weren’t helped by last Thursday’s disastrous teleconference the CEO held with clients.
Becker tried to reassure investors and tech entrepreneurs who, he admitted, were “beginning to panic.”
“I’m asking you to stay calm because this is very important,” Becker told the audience during the call.
“We have been supporting you for a very long time – the final thing we’d like is panic.”
On the same day, the SVB said it would raise $2.25 billion after losing $1.8 billion after taxes in various securities holdings.
March 9
The SVB money crisis and attempts to appease investors were widely reported by the news media. The bank then announced that it was attempting to sell itself – without success to find buyers.
![State regulatory agencies also closed Signature Bank on Sunday.](https://nypost.com/wp-content/uploads/sites/2/2023/03/NYPICHPDPICT000008135292.jpg?w=1024)
March 10
The Federal Deposit Insurance Corporation seized SVB’s assets, marking the largest bank failure since Washington Mutual at the height of the 2008 financial crisis.
The bank collapsed after depositors – mostly tech employees and enterprise capital backed firms – began withdrawing their money, sparking a run on the bank.
twelfth March
Financial regulators shut down Recent York’s business lender Signature Bank, despite the fact that President Biden defended the government’s actions and said taxpayers wouldn’t pay the bailout bill.
The federal government has announced a plan to guard depositors’ money and make it whole, while pledging to not achieve this at the expense of taxpayers.