Skip to content

SVB Financial Group Closure Impacts Global Banking Industry

California banking regulators have taken swift action to close down the startup-focused lender SVB Financial Group. This is the largest bank failure since the financial crisis and has caused the global banking sector to lose billions in market value.

SVB logo in broken glass
SVB logo in broken glass

FDIC Appointed as Receiver

The regulator has appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver, putting the tech-focused lender into receivership. The FDIC will dispose of its assets according to its statement. This makes Silicon Valley Bank the first FDIC-insured institution to fail this year.

Reopening Branches and Access to Deposits

All branches of Silicon Valley Bank will reopen on March 13th, and all insured depositors will have full access to their insured deposits by Monday morning. This should ease the worries of technology workers whose paychecks rely on the bank.

Impact on Stock Market Value

U.S. banks have lost over $100 billion in stock market value over the past two days, with European banks losing another $50 billion. Some experts predict further losses for the sector. The White House has expressed faith and confidence in U.S. financial regulators, while U.S. Treasury Secretary Janet Yellen met with banking regulators and expressed "full confidence" in their abilities.

SVB logo
SVB logo

SVB's Bond Portfolio and Equity Sales

The FDIC stated they would seek to sell SVB's assets, and future dividend payments may be made to uninsured depositors. The bank had struggled to reassure its venture capital clients this week after a capital raise led to its stock collapsing 60% and contributed to wiping out over $80 billion in value from bank shares. SVB had sold a $21 billion bond portfolio and announced it would sell $2.25 billion in common equity and preferred convertible stock to fill its funding hole.

Impact of Rising Interest Rates

The problems at SVB highlight the vulnerabilities in the market as the U.S. Federal Reserve, and other central banks fight inflation by ending the era of cheap money. Global borrowing costs have risen rapidly in recent years, causing stress in the technology sector and other market corners. Some SVB clients started pulling money out, leading to chaos as short sellers profited by $717 million since Wednesday's close.