By Dec. 31, 2022, SVB held $209 billion in assets and $175 billion in deposits, according to regulators. SVB said on its website at the time that "44% of U.S. venture-backed technology and healthcare IPOs bank with SVB."By all accounts, Silicon Valley was an unusual bank. Its management took excessive risks by buying billions of dollars of mortgage-backed securities and Treasury bonds when interest rates were low.Uninsured depositors have lost their money in just 6% of all bank failures since 2008. But before that, it was the norm for uninsured depositors to lose it all when a bank went bust.
What bank failed in 2024 : Republic First Bank reported unrealized securities losses in excess of its equity as early as June 2022. State regulators closed Republic First Bank in April 2024, marking the first bank failure of the year.
Why did SVB collapse so quickly
Why did it collapse The collapse happened for multiple reasons, including a lack of diversification and a classic bank run, where many customers withdrew their deposits simultaneously due to fears of the bank's solvency. Many of SVB's depositors were startup companies.
Why did SVB lose 1.8 billion : Tech companies have been burning through cash, leading to a decline in deposits at Silicon Valley Bank that's been faster than at its peers. With fewer deposits on its balance sheet, the bank said Wednesday it was selling $21 billion in bonds to raise cash, resulting in an after-tax loss of $1.8 billion.
Silicon Valley Bank invested a large amount of bank deposits in long-term U.S. treasuries and agency mortgage-backed securities. However, bonds and treasury values fall when interest rates increase. When the Federal Reserve hiked interest rates in 2022 to combat inflation, SVB's bond portfolio started to drop.
Customers of SVB were withdrawing their deposits beyond what it could pay using its cash reserves, and so to help meet its obligations the bank decided to sell $21 billion of its securities portfolio at a loss of $1.8 billion. The drain on equity capital led the lender to try to raise over $2 billion in new capital.
Who banked at SVB
The bank's customers were primarily businesses and people in the technology, life science, healthcare, private equity, venture capital and premium wine industries. It was influential among startups in India, being unusually willing to serve C corporations whose founders lacked Social Security numbers.Prior to the FDIC, deposits were not insured. Between 1929 to 1933, depositors lost about $1.3 billion when their banks failed. Today, FDIC insures depositors' money up to $250,000 per depositor for each account ownership category if the bank is a member of the FDIC.The largest bank failure ever occurred when Washington Mutual Bank went under in 2008. At the time, it had about $307 billion in assets. During the uncertainty of the banking crisis, however, Washington Mutual experienced a bank run where customers withdrew almost $17 billion in assets in less than 10 days.
About the FDIC:
| Bank NameBank | CityCity | Closing DateClosing |
|---|---|---|
| Signature Bank | New York | March 12, 2023 |
| Silicon Valley Bank | Santa Clara | March 10, 2023 |
| Almena State Bank | Almena | October 23, 2020 |
| First City Bank of Florida | Fort Walton Beach | October 16, 2020 |
Who is to blame for SVB bank collapse : And the culprit in this case was the very institution whose mission is to prevent bank runs and systemic collapse: the Federal Reserve.
Who profited from SVB collapse : Goldman Sachs acted as both the buyer of SVB-held bonds and the architect of failed efforts to raise capital for the bank, raking in profits and fees even as SVB was seized by the Federal Deposit Insurance Corporation (FDIC) in a failure that cost the Federal Deposit Insurance Fund $20 billion and caused 'macro ripples …
How did SVB lose 2 billion dollars
Investors dumped shares of SVB Financial Group and a swath of U.S. banks after the tech-focused lender said it lost nearly $2 billion selling assets following a larger-than-expected decline in deposits.
Goldman Sachs acted as both the buyer of SVB-held bonds and the architect of failed efforts to raise capital for the bank, raking in profits and fees even as SVB was seized by the Federal Deposit Insurance Corporation (FDIC) in a failure that cost the Federal Deposit Insurance Fund $20 billion and caused 'macro ripples …SVB may have lacked visibility of their liquidity position and the risks associated with their bond portfolio in a rising rate environment. Having the ability to see your entire balance sheet and investment portfolio allows you to monitor your liquidity more effectively.
Who is to blame for the SVB collapse : And the culprit in this case was the very institution whose mission is to prevent bank runs and systemic collapse: the Federal Reserve.