Written by Amanda Mills | March 13, 2023
Silicon Valley Bank (SVB) collapsed on March 10th, 2023 after a bank run and a capital crisis led to the second-largest failure of a financial institution in US history. California officials shut down the tech lender and transferred it to the US Federal Deposit Insurance Corporation. The failure of SVB has had a substantial impact for startups, since many have been unable to withdraw funds from the bank.
There were several factors that contributed to the collapse of Silicon Valley Bank. One of them was the Federal Reserve raising interest rates. Some clients of the bank were facing a cash crunch. The bank also sold a bond portfolio at a loss.
US financial regulators rolled out emergency measures to stem potential contagion from the collapse of Silicon Valley Bank. The measures include ensuring that depositors with the failed bank would have access to all their money. The California Department of Financial Protection and Innovation shut down Silicon Valley Bank and appointed the Federal Deposit Insurance Corp. as the receiver
Silicon Valley Bank’s bankruptcy might precipitate a run on other smaller and mid-sized banks throughout the country. Rich people may rush to withdraw funds from accounts that are too large for FDIC coverage and escape to larger, more stable institutions, fearing a systemic danger.
The collapse of Silicon Valley Bank has created a sense of panic within China’s tech start-up and venture capital sector. The lender bridged the gap between American funding and Chinese internet entrepreneurs. In India, a minister is set to meet Indian startups affected by Silicon Valley Bank’s collapse
The collapse of Silicon Valley Bank (SVB) has sent tech startups scrambling. The bank was a vital cog in the tech industry’s financial system and its collapse has left startups scrambling to pay workers as billions in funds were frozen or potentially lost. Regulators have moved quickly to protect customer deposits and shore up confidence in the banking system.
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