SVB Financial Group, doing business as Silicon Valley Bank, had not only the first bank failure since 2020, but it also had the largest bank failure since the Great Recession, as the bank was closed by California bank regulators. Almost 90 per cent of deposits, which are worth $175 billion together, were uninsured as of the end of 2022; companies such as Roku stated that their deposits are, indeed, largely uninsured. This comes as several banks worldwide have lost stock market value.
The genesis of SVB's collapse lies in a rising interest rate environment. As higher interest rates caused the market for initial public offerings to shut down for many startups and made private fundraising more costly, some SVB clients started pulling money out.
To fund the redemptions, SVB sold on Wednesday a $21 billion bond portfolio consisting mostly of U.S. Treasuries, and said it would sell $2.25 billion in common equity and preferred convertible stock to fill its funding hole.
Its stock collapsed and depositors started to panic. SVB scrambled this week to reassure its venture capital clients their money was safe. By Friday, the collapsing stock price had made its capital raise untenable and sources said the bank tried to look at other options, including a sale, until regulators stepped in and shut the bank down.
Of course, right-wingers are capitalising on this moment, because we all know they love regulations on banks and corporations! That is, if the companies go “woke”.