Regulators Shut Down Silicon Valley Bank

Facts

• Financial regulators have closed Silicon Valley Bank (SVB) and taken control of its deposits, according to the Federal Deposit Insurance Corp (FDIC), marking the largest US bank failure since the 2008 financial crisis.¹
• As California regulators shut down the tech lender, the FDIC has taken over the receiver. The FDIC will likely liquidate the bank’s assets to back its customers, and the agency says all insured depositors will have full access to their insured deposits no later than Monday.²
• Amid rising interest rates and a recent meltdown in the tech sector, the SVB took a $1.8B hit from a $21B fire sale of bond holdings. SVB Financial’s, SVB’s parent, shares were down 60% on Thursday and trading was halted on Friday as the bank was in talks to sell itself Friday morning.³
• SVB was the 16th-largest US bank as of December 2022 and had $209B in assets, with more than $175B in deposits. Focusing on the booming tech sector, SVB grew rapidly, but post-pandemic layoffs led to a decline in the industry.⁴
• The problems leading to SVB’s collapse appear to be isolated to the bank itself, but the run on the bank sparked concerns about the industry as a whole. However, bank analysts at Morgan Stanley wrote, “We do not believe there is a liquidity crunch facing the banking industry.'⁵
• Banks around the world are experiencing severe financial worries as global borrowing costs have risen at the fastest pace in decades. US banks have lost over $100B in stock market value over the past two days, with European banks losing roughly $50B in value.⁶

Sources: ¹CNBC, ²CNN, ³New York Post, ⁴NBC, ⁵NPR Online News and ⁶Reuters.

Narratives

• Pro-establishment narrative, as provided by CNN. While there is a fear that SVB’s collapse is a sign of a financial crisis similar to that of 2008, that is not the case. The problems that faced SVB were company-specific and tied specifically to the tech sector. The banking sector as a whole is stable, and there is no need to worry about a new financial crisis.
• Establishment-critical narrative, as provided by ZeroHedge. SVB’s collapse was not surprising to anyone other than the global markets and so-called “experts.” Rising interest rates have caused massive losses that happen to have dramatically hit SVB first, but the problem is not isolated to SVB. Just like SVB, other banks will look to sweep their losses under the rug and we will continue to see the largest collapses since 2008.