US regulators closed Silicon Valley Bank (SVB) this Friday and took control of its clients’ deposits in one of the biggest falls of a bank in that country since 2008.
The decision was made by California authorities after the company, a key technology lender, failed to raise enough funds to cover a loss from the sale of assets hit by high interest rates.
Their problems led clients to attempt to withdraw their funds and raised fears about the banking sector in general.
Officials said they closed the bank to “protect insured depositors.”
The Federal Deposit Insurance Corporation (FDIC), which protects deposits of up to $250,000, reported that it took over the funds. Customers with insured deposits will have access to their money “no later than Monday in the morning,” the state entity said, adding that the money raised from the sale of the bank’s assets will go to uninsured depositors. The episode came after SVB announced that it was trying to raise US$2.25 billion to cover their losses. The news caused investors to flee the bank. Shares experienced their biggest single-day drop on Thursday, plunging more than 60% and falling further in after-hours trading.
maximum uncertainty
Concerns that other banks could face similar problems led to widespread selling of bank shares globally on Thursday and early Friday. SVB did not immediately respond to a BBC request for comment.
A crucial lender to early-stage companies, known as start-ups, SVB was the banking partner for nearly half of the US-backed healthcare and technology companies listed on the stock markets last year.
Speaking from Washington on Friday, US Treasury Secretary Janet Yellen said she is monitoring “recent developments” at the SVB and other banks “very carefully.” be cause for concern,” he said.
Investors also had to deal with the recent fall of Silvergate Capital, a cryptocurrency-focused lender, whose shares lost 22% after it said late on Thursday that it planned to scale back its operations.
This bank was in trouble after it was hit by losses following the collapse of FTX.
While many Wall Street analysts have argued that the SVB crisis is unlikely to spill over into the broader banking system, shares of other midsize and regional banks were reeling on Friday amid uncertainty.
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