FinancialBuzz.com’s latest The Buzz Show: Featuring Our Corporate News Recap on “Silicon Valley Bank Collapse Triggers Shut Down by Regulators”
SVB Financial Group (NASDAQ: SIVB) subsidiary Silicon Valley Bank had collapsed last Friday and was taken over by federal regulators, triggering the largest U.S. bank to fail since the 2008 global financial crisis.
Previously during the Covid pandemic, the bank’s business increased as tech companies flourished. This filled the bank with deposits over USD 100 Billion. In 2021 as interest rates were at record lows the bank invested billions of dollars into long term U.S. Treasury bonds which are backed by the U.S. government and considered safe investments. The issue is that they only pay out in full when held to maturity and otherwise long term bonds risk losing value as interest rates rise.
In 2022 the Federal Reserve began to raise interest rates in an aggressive manner to control rampant inflation. The rate increase hurt the value of government bonds. As the tech sector entered a bearish trend, companies began to withdraw their deposits from the bank. In order to satisfy these withdrawals, SVB has to sell part of its bond holdings that registered at a loss of around USD 1.8 Billion. The announcement of this has scared off clients of the bank as they proceeded to withdraw money from the bank which triggered a massive collapse that led the bank to be taken over by the FDIC.
For more information, please visit: SVB Financial Group
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