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Silicon Valley Bank stars in the biggest fall of a bank in the US since the financial crisis


The entity, specialized in loans to entrepreneurs and small technology companies, has been intervened by US regulators

An employee of the Silicon Valley Bank speaks this Friday with clients of the institution, whose closure has been announced this morning.Jeff Chiu (AP)

US banking regulators have closed Silicon Valley Bank this Friday morning due to the rapid flight of deposits it suffered.

The intervention of the California-based entity, whose main clients are entrepreneurs and technology companies from its state and from Massachusetts, ends two days of uncertainty in which its shares plummeted on the stock market, after they were announced his plans to increase capital and the sale at a loss of an important portfolio of bonds so as not to run out of liquidity.

The sudden bankruptcy of the institution has brought to mind analysts the worst of the financial crisis that was at the origin of the Great Recession.

Although little known internationally for its work more focused on companies, this is the second largest fall of a US bank, only behind Washington Mutual, which collapsed in 2008. In the midst of the crisis, regulators have tried to provide certainty .

"All insured depositors will have full access to their insured deposits no later than Monday, March 13, 2023," said the Federal Deposit Insurance Corporation (FDIC), the public body that controls the financial institution created in 1982.

The uninsured, that is, all those with more than $250,000 in their accounts, will have a more difficult time: they will receive an advance next week, and a certificate indicating the remaining amount of their funds.

When the bank's assets are sold, they will charge more, although right now there is no guarantee that they will recover everything.

It is still unknown how many affected there are, but as of December 31, 2022, the bank had some 209,000 million in assets and 175,400 million in deposits.

The FDIC has reported that another banking institution, the National Bank of Santa Clara, has been created to absorb the clients and accounts of Silicon Valley Bank.

"At the time of closing, the number of depositors who exceeded the insurance coverage limits was undetermined," the statement said.

The figure will be available in the coming days, once the Santa Clara bank obtains the additional information from the accounts and contacts the clients.

The FDIC has asked all depositors with balances greater than $250,000 to contact them directly by phone.

To reassure the bank's customers, the regulator has reported that the headquarters of Silicon Valley Bank and all its franchises will reopen their doors on Monday.

Online banking services and apps will also be available.

The case not only brings the financial crisis back to the fore.

It was also the first failure of a bank in 2023. To find the closest precedent, one must go back to October 2020, when the Almena State Bank of Kansas closed, although due to its smaller size, its implications were less, unlike the Silicon Valley Bank, which has caused declines in the stock markets around the world.

The bankruptcy of the bank is a blow to the technological heart of California, which is in turn one of the most important engines of the local economy.

Silicon Valley Bank was at the epicenter, in a hotspot for



It managed to position itself as a


and highly specialized institution in an environment full of adversities, such as those faced by entrepreneurs in their early years, when it is difficult to obtain loans due to lack of income.

His clients included, among others, the venture capital fund Andreessen Horowitz;

Beyond Meat, an artificial meat company that went public last year;

or the communication giant Discovery.

A few years ago, bank executives boasted that they served 65% of America's startup companies, as well as venture capital funds like Insight Partners.

The strategy then was to become the first bank, the one in which new entrepreneurs matured their projects until they were ready to make the leap to larger institutions.

In the past decade, the institution has shown sustained growth, expanding its lending capacity by 25% every year since 2012. This has led them to transcend their natural borders of San Francisco and Boston, the main environments for companies.

The bank's money also backed projects by companies in Canada, China, Denmark, Germany, Ireland, Israel, Sweden and the United Kingdom.

Although it is the most serious, this has not been the only stage of turbulence for the bank.

In 2001, stocks lost 50% of their value when the tech bubble burst.

Now, his name joins that of other fallen banks as analysts, investors and authorities monitor possible contagion.

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Source: elparis

All business articles on 2023-03-10

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