California Shuts Down Silicon Valley Bank
- The collapse of Silicon Valley Bank is the biggest collapse of a US financial institution since 2008.
- Some workers whose payments relied on SVB were concerned about receiving payment on Friday.
- According to a calculation by Reuters, U.S. banks have lost more than $100 billion in stock market value over the last two days, while European banks have lost another $50 billion.
Silicon Valley Bank (SVB), a 40-year-old financial firm that served the tech market and that, until its dramatic collapse, was the 16th largest U.S. bank, was shut down by California regulators on Friday. SVB’s stock fell by 70% on Friday, and trading of its shares was later halted. Companies and wealthy customers are generally unaware of what will happen to their funds after SVB’s failure.
SVB’s decline was allegedly caused by fears of a bank run, which became reality last week as anxiousness over the bank’s balance sheet spread among depositors, who were largely employees of technology companies and venture capital-backed businesses.
US regulators quickly intervened as the situation got messier. The California Department of Financial Protection and Innovation closed the bank while the Federal Deposit Insurance Corporation (FDIC) was named receiver to secure insured deposits. According to reports, the Deposit Insurance National Bank of Santa Clara is now holding the insured deposits from SVB.
Regulators in California said they took over the bank due to “inadequate liquidity and insolvency.” SVB’s failure has been named the biggest bank collapse in over a decade since Washington Mutual’s collapse in 2008.
According to the FDIC’s statement, insured depositors will be able to retrieve their money by Monday morning at the latest. The announcement noted that SVB branches will reopen on Monday under the regulation of the FDIC.
Is crypto at risk?
Many cryptocurrency businesses transferred their cash to Signature Bank in the wake of Silvergate’s decline, but even the company appeared unsteady on Friday as its shares fell over 20% and trading was suspended. While many observers were concerned about a possible crypto sector contagion caused by Silicon Valley Bank, financial professionals believed it was highly unlikely.
According to Austin Campbell, the managing partner of blockchain-focused Zero Knowledge Consulting and adjunct professor at Columbia Business School, the recent string of bank failures is more about structural problems than the liquidity risks posed by cryptocurrencies.
As of today, Circle, which deposited an undisclosed sum of its reserves with Silicon Valley Bank, looks to be the cryptocurrency company with the highest exposure to the California-based bank.
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