On Friday, Silicon Valley Bank collapsed, the largest bank in the country’s history to run out of assets except during the 2008 financial crisis. The consequences for the upcoming investment week could be disastrous. What happens now?
On Friday, the federal agency FDIC took over Silicon Valley Bank after the stock plummeted when it couldn’t pay out the money that companies and individuals had deposited.
Fall after fall
The stock of the financial bank fell 60 percent on Thursday and fell another 70 percent in Friday’s pre-trading.
It’s a bad mark for a bank, of course, that they couldn’t hold onto the money. After all, it’s the only job of a financial institution.
Biggest collapse since the financial crisis in 2008
The crash is the biggest in US history, excluding 2008 when Washington Mutual collapsed.
Silicon Valley Bank is a financial bank that has focused on financing tech companies, as the name suggests.
After asking investors for more money to cover expenses on Thursday, what happens when a bank says it has little money happened: everyone with money in the bank wanted to move it elsewhere so as not to be the one to lose their money.
The offering had the opposite effect, in other words. The bank’s financial problems became bigger than ever.
To cover the holes, they had to sell their entire portfolio, at a discount.
It calmed no one. And there was no offering.
To control the bank, the federal agency created a new state-owned company called the Deposit Insurance National Bank of Santa Clara.
All assets have been moved to the new bank.
It means the death of SVB, according to the Wall Street Journal.
On Monday morning, insurance companies will have access to the assets to pay out to the affected. But it is unlikely that those who have assets exceeding the insurance ceiling will get anything back.
Shockwaves to the EU
This sends shockwaves through the entire American financial world, and the EU is not immune either. Monday could therefore continue to be bloody for the stock market and listed companies. Not least, large banks worldwide have fallen from great heights on Friday.
This is not a neighborhood bank. SVB is the sixteenth largest in the United States, with an estimated $209 billion in assets, as of the end of last December, according to Federal Reserve data.
On Friday morning local time, the California Department of Financial Protection closed the disgraced and ruined bank, and control was given to the FDIC.
This was reported by CNBC.