A man stands near the sign with the Silicon Valley Bank (SVB) logo at Park Avenue location, in New York City, US (Image: Reuters)
The SVB bank sold about $21 billion in securities, leading to a loss of $1.8 billion and depositors started withdrawing their funds en masse which precipitated its failure
The United States’ banking regulators shut down Silicon Valley Bank (SVB) on Friday and has now gained control of its deposits. This marks the biggest retail banking failure since the global financial crisis.
Before the bank was shut down, the high-tech lender, which financed several startups since the 1980s, saw their shares plummet and concerned customers feared what may become of their deposits.
The news agency compiled some of the biggest retail banking failures, ranked by the value of their assets when they collapsed:
- HBOS (United Kingdom), on 09/17/2008 (Around $811 billion)
- Washington Mutual (United States), on 09/25/2008 ($307 billion)
- Silicon Valley Bank (United States), on 03/10/2023 ($209 billion)
- Sachsen LB (Germany), on 08/26/2007 (Around $92 billion)
- Bradford & Bingley (United Kingdom), on 09/29/2008 (Around $63 billion)
- IndyMac (United States), on 07/11/2008 ($32 billion)
The bank sold about $21 billion in securities, leading to a loss of $1.8 billion. Several SVB’s clients held more than the $250,000 that are reimbursed from US-insured institutions and they started withdrawing their funds en masse which precipitated the bank’s failure.
The authorities swooped in on Wednesday and seized key assets of the bank as the medium-sized bank was not capable of staying afloat on its own.
SVB, before its collapse, was the 16th largest US bank by assets. At the end of 2022, SVB had $209 billion in assets and approximately $175.4 billion in deposits.
The demise of SVB represents the largest bank failure since Washington Mutual in 2008. This is also the second largest failure ever for a retail bank in the United States, news agency AFP reported.
The global financial crisis of 2008 also saw a number of corporate and investment banks fail, led by the bankruptcy of Lehman Brothers on September 15, 2008, whose assets were worth $639 billion at that time.
Aftermath
Analysts at Morgan Stanley were quick to assure that there was no liquidity crunch. “We want to be very clear here … we do not believe there is a liquidity crunch facing the banking industry, and most banks in our coverage have ample access to liquidity,” they were quoted as saying by AFP.
Treasury Secretary Janet Yellen described the US banking sector as “resilient”.
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