Silicon Valley Bank (SVB) was a commercial bank headquartered in California, US. SVB was on the list of largest banks in the United States and was the biggest bank in Silicon Valley based on local deposits, with a 25.9% market share as of June 30, 2016. It was a subsidiary of SVB Financial Group, a bank holding company.
Silicon Valley Bank’s recent collapse has sent shockwaves through the financial industry. According to CNN, the tech lender, which was among the top 20 American commercial banks with $209 billion in total assets, saw a bank run (a situation in which customers rushed to withdraw their funds from the bank) and capital crisis that resulted in its closure by California regulators. The US Federal Deposit Insurance Corporation is now acting as a receiver and will likely liquidate the bank’s assets to pay back customers.
The decline of Silicon Valley Bank can be traced partly to the Federal Reserve’s interest rate hikes over the past year. Higher rates undercut the value of tech stocks and made it difficult for tech firms to raise funds, prompting many to draw down their deposits at the bank. This led to the run on the bank’s deposits, which forced regulators to take control.
Overall, the banking industry remains a crucial driver of economic growth and innovation, and it is up to regulators and market participants to work together to ensure its continued stability and resilience.
