Silicon Valley Bank is completely down, for good. California regulators have taken control of the huge western bank, and this is the second largest bank failure in US history, only second to the collapse of Washington Mutual in the 2008 financial crisis.
Basically, it started on SVB's end, with them investing billions into bonds. Then, interest rates started to rise to curb inflation, which the bank did not expect, and they ended up losing over $2 billion in bond value. This was when the collapse started. Since SVB didn't have the money to pay their customers back for regular withdrawals, they had to sell their securities at extremely low prices due to the high interest rates, and they lost a lot of money. Unfortunately, when a bank sells a lot of bonds at one time, they are required by the law to publicly announce it. When they did, people got scared that their money would be lost, so they started making massive withdrawals. In fact, over $42 billion worth of deposits were withdrawn in just 24 hours. As a result, the Federal Depository Insurance Corp. (FDIC) shut it down and took over the bank's assets to recover depositor funds. Most SVB depositors have received all of their money back, and even though the organization only insures $250,000, many customers of SVB had much more money in the bank than that, but the FDIC has assured that they would get 100% back.
By Armaan Dhawan
Commentaires