The Latest on the Silicon Valley Bank Collapse: Live Updates

1:46 p.m. ET, March 13, 2023

Find out the latest on the collapse of Silicon Valley Bank – and its aftermath

From CNN’s Hanna Ziady

A view of the Park Avenue location of Silicon Valley Bank (SVB), in New York, United States, March 13, 2023.

(David ‘Dee’ Delgado/Reuters)

Bank of Silicon Valley collapsed at incredible speed on Friday. And while the US federal government has stepped in to guarantee customer deposits, its fall continues to reverberate through global financial markets – as seen in the subsequent closure of Signature Bank – and investors wonder if its disappearance could trigger a wider banking collapse.

Here is What do you want to know on the biggest US bank failure since the 2008 global financial crisis:

Why did it collapse? : The origin of his disappearance goes back several years. As many other banks, SVB invested billions in US government bonds in the era of near-zero interest rates. What appeared to be a safe bet quickly unblocked as the Federal Reserve aggressively raised interest rates to keep inflation under control.

When interest rates rise, bond prices fall, so rising rates have eroded the value of SVB’s bond portfolio. The portfolio had an average yield of 1.79% last week, well below the 10-year Treasury yield of around 3.9%, Reuters reported.

At the same time, the Fed’s hike frenzy has pushed up borrowing costs, meaning tech startups have had to funnel more cash to pay down debt. At the same time, they were struggling to raise new venture capital funds. This has forced companies to tap into deposits held by the SVB to fund their operations and growth.

Then the bank ran: When SVB announced it had sold a bunch of stocks at a loss and would be selling $2.25 billion in new shares to fill the hole in its finances, customers panicked and withdrew their money in droves. .

The bank’s stock fell 60% on Thursday and dragged other bank stocks down with it. On Friday morning, trading in SVB shares was halted and it abandoned efforts to raise capital or find a buyer. California regulators stepped in, closing the bank and placing it in receivership under the Federal Deposit Insurance Corporation, which usually means liquidating the bank’s assets to pay off depositors and creditors.

In an effort to prevent further bank runs and help businesses pay their staff and finance their operations, US regulators said Sunday that they would guarantee all deposits of SVB customers. The intervention does not amount to a 2008-style bailout, which means investors in the company’s stocks and bonds will not be protected.

Will this trigger a banking crisis? There are already signs of strain at other banks, and authorities in the United States and across Europe are watching closely. Trading in First Republic Bank (FRC) and PacWest Bancorp (PACW) was temporarily halted on Monday after shares plunged 65% and 52% respectively. Charles Schwab (SCW) stock was down 7% at 11:30 a.m. ET Monday.

In Europe, the benchmark Stoxx Europe 600 Banks Index, which tracks 42 major European and UK banks, fell 5.6% in morning trade, posting its biggest decline since last March. Shares of struggling Swiss banking giant Credit Suisse fell 9%.

The SVB is not the only financial institution whose investments in government bonds and other assets have fallen dramatically. By the end of 2022, U.S. banks were sitting on $620 billion in unrealized losses — assets that have fallen in price but have yet to be sold, according to the FDIC.

Another key title: HSBC stepped in on Monday to buy SVB UK for £1 ($1.2), securing the deposits of thousands of UK tech companies that hold cash with the lender. Had a buyer not been found, SVB UK would have been forced into bankruptcy by the Bank of England, leaving customers with only deposits worth up to £85,000 ($100,000) – or £170,000 ($200,000) for joint accounts – secured.

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