![]() ![]() (Michaela Vatcheva/Reuters)īank regulators had to seize Silicon Valley Bank's assets to protect the assets and deposits remaining at the bank. The entrance to a Silicon Valley Bank in Menlo Park, Calif., is seen on Friday. Venture capital funding was drying up, companies were not able to get additional rounds of funding for unprofitable businesses, and therefore had to tap their existing funds - often deposited with Silicon Valley Bank, which sat in the centre of the tech startup universe. Typically that's not an issue, because banks hold onto those for a long time - unless they have to sell them in an emergency.īut Silicon Valley's customers were largely startups and other tech-centric companies that started needing cash more over the past year. These investments are typically safe, but the value of those investments fell because they paid lower interest rates than what a comparable bond would pay if issued in today's higher interest rate environment. The bank bought billions of dollars worth of bonds over the past couple of years, using customers' deposits as a typical bank would normally operate. Vehicles are parked outside a Silicon Valley Bank branch in Wellesley, Mass., on Saturday. ![]() Federal Reserve's aggressive plan to increase interest rates to combat inflation. Silicon Valley Bank was hit hard by the downturn in technology stocks over the past year as well as the U.S. How did this happen? Here's what to know about why the bank failed, who was affected most, and what to know about how it may, and may not affect, the wider banking system in the U.S. Gavin Newsom said Saturday that he's talking with the White House to help "stabilize the situation as quickly as possible, to protect jobs, people's livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy." Some startups that had ties to the bank scrambled to pay their workers, and feared they might have to pause projects or lay off employees until they could access their funds.Ĭalifornia Gov. ![]() Its downfall is the largest failure of a financial institution in the United States since Washington Mutual collapsed at the height of the financial crisis more than a decade ago. The financial institution best known for its relationships with high-flying tech startups and venture capital firms, Silicon Valley Bank, experienced one of the oldest problems in banking - a bank run - which led to its failure on Friday. ![]()
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