US authorities shut down Silicon Valley Bank, the bank of technology startups that rocked global stock exchanges for two days. The California Department of Financial Protection and Innovation has given Svb control of the federal deposit insurance corporation. The independent agency of the US government that provides deposit insurance for participating banks. It is the biggest bank failure since the financial crisis And with about 209 billion in assets, The second in the history of the American banking system.
Fear of bankruptcy of the Santa Clara, California-based credit institution caused financial and banking stocks to plummet, sending stock markets around the world into a tailspin. I also got involved US Treasury Secretary Janet Yellenwho said during a congressional hearing: «There are recent developments affecting some banks I watch very closely and when banks experience financial losses it is a cause for concern and it should be». Shares in First Republic Bank, which serves select venture capital firms and technology-related clients, also traded on the exchange, after losses of 40%.
To offset the $1.8 billion in losses from the sale of bonds in its portfolio, the cash-strapped Silicon Valley bank, which specializes in the technology sector, surprisingly decided to increase its capital by $2.25 billion. But the announcement sparked panic among investors On Thursday, Svb shares fell on Nasdaq by 60.4%. And then, hours later, by another 30%. The news of Svb’s problems intensified Already nervously shaking the markets due to the closure of Silvergate, the lender has focused on cryptocurrencies. Thus, the double alarm hit the stocks of other banks, first on Wall Street, where Thursday pounds Four major US banks – Citigroup, Wells Fargo, JpMorgan Chase and Bank of America – have burned more than $52 billion in capitalization.. Then, on Friday, in price lists all over the world, including Italy. While Svb stock was quickly put on hold after dropping 68% before the open. at this point The bank had set aside the capital increase and would evaluate the sale or transfer of a share of its capital.
stock market day
In Europe, the Stoxx 600 is down 1.4% at lunchtime, with London in the black jersey (-1.8%). Milan and Madrid (-1.6%), Frankfurt (-1.4%) and Paris (-1.3%) also declined. The banking stock index bottomed (-3.9%), dragged down by the collapses of Societe Generale (-5.5%), Deutsche Bank (-5.4%) and Banco Santander (-4.9%). In Piazza Avari among the worst stocks are Bper (-4.2%), Fineco (-3.6%), Banco Bpm (-3.1%) and Mps (-3%). But the decline also extended to technology and auto companies.
no Good data on the performance of the US labor market, with 311 thousand new jobs created in February, gave Wall Street the necessary push that European stock exchanges were waiting for to reduce losses.
Svb specializes in the startup and technology sectors
Founded in 1983, Svb operates in the United States, Europe, Asia and Israel
It offers a range of financial services to the startup ecosystem, from simple bank account maintenance to fundraising advice. On its website, Sbv boasts that it works with about 50% of the technology, healthcare, and biotech companies backed by US venture capital funds, including platforms Pinterest and Shopify.
The problems started on Wednesday. To boost capital in the wake of losses from the broader tech crisis, the bank announced a $2.25 billion increase, which was not welcomed by investors. Allegedly, the partners of the major venture capital firms contacted the portfolio companies, in some cases inviting them to withdraw their money from the bank. Including the agency bloomberg He quotes Peter Thiel’s Funders Fund, Coatue Management, and Union Square Ventures.
The point is that after more than a decade of no cost for moneyThe sharp rise in interest rates has left banks saddled with low-interest bonds, which cannot be sold quickly without incurring losses. So if too many customers withdraw their deposits at once, you risk having a meltdown. This is what happened to Svb which sold $21 billion in securities to get instant liquidity, at a loss of $1.8 billion.
The Great Financial Crisis of 2007-2008 and the Lehman Brothers case
Also last time, the alarm bell went off from a bank, causing the Great Global Financial Crisis of 2007-2008
, the worst since the 1930s. First it was Bear Stearns, which collapsed in March 2008 and was sold to JPMorgan Chase. Then, in September of the same year, Lehman Brothers, which the Fed decided instead not to bail out. The rest is recent history. The hope is that more than a decade of zero interest rates and ultra-loose monetary policy have not created the ground for a new terrible crisis.
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