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NEW YORK: SVB Financial Group Inc’s shutdown and takeover by banking regulators on Friday can be traced to the U.S. Federal Reserve raising interest rates and souring the risk appetite of investors.

Here is the sequence of events that led to Silicon Valley Bank’s failure:

Why did Silicon Valley Bank in the US collapse? Business Recorder’s Omar Qureshi explains

Federal Reserve raises rates

The Federal Reserve has been raising interest rates from their record-low levels since last year in its bid to fight inflation. Investors have less appetite for risk when the money available to them becomes expensive due to the higher rates. This weighed on technology startups - the primary clients of Silicon Valley Bank - because it made their investors more risk-averse.

Banking regulators close SVB, move quickly to avert crisis

Some Silicon Valley Bank clients face cash crunch

As higher interest rates caused the market for initial public offerings to shut down for many startups and made private fundraising more costly, some Silicon Valley Bank clients started pulling money out to meet their liquidity needs. This culminated in Silicon Valley Bank looking for ways this week to meet its customers’ withdrawals.

Silicon Valley Bank sells bond portfolio at a loss

To fund the redemptions, Silicon Valley Bank sold on Wednesday a $21 billion bond portfolio consisting mostly of U.S. Treasuries. The portfolio was yielding it an average 1.79%, far below the current 10-year Treasury yield of around 3.9%. This forced SVB to recognize a $1.8 billion loss, which it needed to fill through a capital raise.

SVB announces stock sale

SVB announced on Thursday it would sell $2.25 billion in common equity and preferred convertible stock to fill its funding hole. Its shares ended trading on the day down 60%, as investors fretted that the deposit withdrawals may push it to raise even more capital.

China venture of collapsed US lender SVB says its corporate structure is sound

Stock sale collapses

Some SVB clients pulled their money from the bank on the advice of venture capital firms such as Peter Thiel’s Future Fund, Reuters reported. This spooked investors such as General Atlantic that SVB had lined up for the stock sale, and the capital raising effort collapsed late on Thursday.

SVB goes into receivership

SVB scrambled on Friday to find alternative funding, including through a sale of the company. Later in the day, however, the Federal Deposit Insurance Corporation (FDIC) then announced that SVB was shut down and placed under its receivership. The FDIC added that it would seek to sell SVB’s assets and that future dividend payments may be made to uninsured depositors.

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Rebirth Mar 11, 2023 07:38pm
This decade started with their actual quackery (pandemic). Add to that their environmental quackery. They were already undergoing a prolonged phase of tech quackery in the form of mind control, which still exists now. This tech quackery coupled with financial quackery relating to interest rates is the current scenario. As if depleting their microchips and making air defence systems useless wasn’t bad enough, now they’ve completely bankrupted their tech sector taking their economy towards deindustrialization. Taking away crucial resources from the tech sector, both semiconductors (microchips) and supposedly talented tech graduates for mind control, had created a hollow tech startup sector. The companies weren’t just dealing with retail. They also deal with healthcare, medicine, pharmaceuticals and biotechnology. Another sector they created a vacuum in. Add World War 3 and demographic changes to the mix and you’ll see how in 3 years, they ended a 3 centuries-old western civilization.
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Masud Canada Mar 12, 2023 11:31pm
I thought Pandemic was a warning sign from Nature to correct our injustices and inequalities. On the contrary , it has exacerbated both.
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