The largest bank in the US has failed since the 2008 crisis
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The California regulator has declared bankrupt Silicon Valley Bank (SVB), the 16th largest US bank. The credit organization was focused on start-ups. At the end of 2022, 89% of deposits — about $175 billion — were not insured.
The SVB bankruptcy was the largest since the 2008 crisis, the bank became the second largest bankrupt in US history after Washington Mutual Bank. The Associated Press. “This is an extinction-level event for startups,” said Harry Tan, CEO of startup incubator Y Combinator. His company has helped launch Airbnb, DoorDash, and Dropbox and sent hundreds of entrepreneurs to SVB.
As transmits Reuters, the fate of uninsured deposits is yet to be determined. Companies such as video game maker Roblox Corp and network media player maker Roku Inc have already announced deposits of hundreds of millions of dollars in SVB. Shares of the latter fell 10% after it became known that most of the investments are not insured.
SVB transferred to the Federal Deposit Insurance Commission. The rest of the capital will be used to compensate depositors and to repay debts to creditors. Treasury Secretary Janet Yellen is “watching the situation closely,” the White House said. Cecilia Rose, chairman of the White House Council of Economic Advisers, noted that the US banking system now “is fundamentally different than it was 10 years ago.”
On Wednesday, March 8, the bank held an additional share issue for $1.75 billion “to strengthen its balance sheet.” In its investor prospectus, the bank explained that it needed to recover $1.8 billion in losses it incurred as a result of the sale of part of its asset portfolio. After that, the shares of the company collapsed by 60%.
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