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On Friday, SVB Financial Group became the biggest bank failure since the financial crisis. The California-based bank was closed by state regulators, and the Federal Deposit Insurance Corporation (FDIC) was appointed as receiver to later dispose of the bank's assets.
The sudden collapse roiled global markets and stranded billions of dollars belonging to companies and investors, with 89% of the bank's $175 billion in deposits uninsured as of the end of 2022.
Silicon Valley Bank's main office and all branches will reopen on March 13, and insured depositors will have full access to their insured deposits no later than Monday morning. However, the fate of uninsured deposits remains to be determined.
The collapse sent shockwaves through the startup community, which has come to view the lender as a reliable source of capital.
Businesses like streaming gadget maker Roku Inc. and video game developer Roblox Corp. claimed to have hundreds of millions of dollars in bank deposits. The technology workers whose paychecks relied on the bank were also worried about getting their wages on Friday.
The problems at SVB underscore how the US Federal Reserve and other central banks' campaign to fight inflation by ending the era of cheap money is exposing the vulnerable market and striking the banking sector.
The US banks have lost over $100 billion in stock market value over the past two days, with European banks losing another $50 billion in their value.
Some analysts have predicted more pain for the sector as concerns about hidden risks in the banking sector and its vulnerability to the rising cost of money spreads.
The White House expressed confidence in US financial regulators and the US banking system's fundamental strength. It is the first bank failure since 2020, making it a wake-up call.
- Charu Kapoor
