Silicon Valley Bank collapsed-Second Largest Bank Collapse in US History

Second Largest  Bank Collapse in US History. 

Silicon Valley Bank collapsed

According to US Treasury Secretary Janet Yellen, the Biden administration is attempting to assist the depositors who are concerned about their money but will not save Silicon Valley Bank. Deposits up to $250,000 (about 2.04 crore) are insured by the Federal Deposit Insurance Corporation, however most businesses and wealthy customers of the bank had accounts beyond that level.

The stunning announcement that Silicon Valley Bank would be shutting down on Friday shocked the financial community. Since the collapse of Washington Mutual more than ten years ago, the fall of the 16th largest lender in the United States is regarded as the greatest bank failure.

Silicon Valley Bank


The Biden administration will not save the shuttered bank, according to US Treasury Secretary Janet Yellen, but is trying to assist the depositors worried about their money. Deposits up to $250,000 (about 2.04 crore) are insured by the Federal Deposit Insurance Corporation, however most businesses and wealthy customers of the bank had accounts beyond that level.

With plans to reinvest the roughly $21 billion in assets that were sold, the bank would incur an after-tax loss of $1.8 billion for the first quarter. According to Bloomberg, the bank also disclosed offers for its common stock for $1.25 billion and instruments representing convertible preference shares worth $500 million.

The SVB shares plunged by 41 per cent, their biggest decline since 1998. The slump in their shares came after SVB announced that it had sold all of the available-for-sale securities in its portfolio and updated its forecast for the year to include a sharper decline in net interest income.

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The SVB Financial Group's CEO Greg Becker advised clients to stay calm amid concern about the lender's financial position.

Well-known venture capitalists suggested that portfolio companies take their money out of Silicon Valley Bank. This occurred on a day when SVB shares were suspended following a significant decline in premarket trading.

Before the bell, the stock was trading at $63.99, and if present declines persisted, it would open at its lowest price in more than a decade.

"There are new events that worry a few institutions that I am examining very closely," US Treasury Secretary Janet Yellen said.

According to Reuters, a California regulator closed Silicon Valley Bank and named the Federal Deposit Insurance Corporation as receiver. The bank's shares were suspended this day after falling 66% in premarket trading.

 

(With information from Reuters and Bloomberg)

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