On March 8, 2023, Silicon Valley Bank (SVB) reported a $1.8 billion loss on its sale of US Treasury securities, causing investors to panic. As news of SVB’s dire situation unfolded, a group of about a dozen tech founders reportedly went to SVB’s Manhattan location on Park Avenue to withdraw their money. As depositors began withdrawing their money, prominent venture capital firms began advising the companies they invested in to pull their business from SVB.
JUST IN: Silicon Valley Bank $SIVB donated $73,450,000 to "Black Lives Matter Movement & Related Causes." pic.twitter.com/dKQN8mwRbT
— Watcher.Guru (@WatcherGuru) March 15, 2023
SVB was shut down on Friday morning by California regulators, and shares in the bank fell 66%. Based in Santa Clara, and with about $200 billion in assets, SVB was the 16th largest bank in America, making it the biggest bank failure since the global financial crisis of 2008. About half of all venture capital-funded startups in the US were customers of SVB, which is about 65,000 startups.
The collapse of SVB, along with the collapse of two other banks, Silvergate Capital and Signature Bank, has caused fears that it could still have ripple effects across the globe. Daniel Ives, the managing director of US-based Wedbush Securities, said that the collapse of SVB will change the tech startup scene for good. He said SVB was “an artery” for tech startups and venture capital financing for decades, and its disappearance could leave startups struggling to get funding.
Also read | List of companies impacted by Silicon Valley Bank collapse
However, unlike the global financial crisis, when regulators were criticized for moving too slowly, this time the reaction was swift. On Monday, Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg announced “decisive actions to protect the US economy” by ensuring that depositors would be protected.
Despite this, Betashares Chief Economist David Bassanese fears the collapse of SVB could spark a US recession, which would in turn exacerbate Australia’s current economic problems and raise the risk of a recession there.
ok this video is literally the only thing that’s helped me understand the silicon valley bank crisis pic.twitter.com/kYnKSTm8Wp
— Marisa Kabas (@MarisaKabas) March 13, 2023
In comparing the collapse of Silicon Valley Bank to the 2008 financial crisis, it’s important to note that the 2008 crisis was caused by a number of factors, including a housing market collapse, the subprime mortgage crisis, and the failure of large financial institutions such as Lehman Brothers. While the collapse of SVB is a significant event, it is not necessarily as widespread in its impact as the 2008 crisis.
Also read | What does FDIC do? All about BankFind, insurance, watch list, website, and agency’s handling of Silicon Valley Bank collapse
However, the collapse of SVB does highlight the importance of financial regulation and the need for swift action in the face of a crisis. The quick response from regulators in protecting depositors is a positive sign, and it remains to be seen what the long-term effects of the collapse will be on the tech startup scene and the global economy as a whole.