Silicon Valley Bank (SVB) became the largest bank to fail since the 2008 financial crisis on Friday, in a sudden collapse that roiled global markets, and left billions of dollars belonging to companies and investors stranded. United States regulators seized the assets of the Santa Clara, California-based bank after depositors began withdrawing funds in masses amid fears over the lender’s financial health.
SVB faced some regulatory issues in 2021. In March 2021, the bank was fined $3.6 million by the US Federal Reserve for deficiencies in its anti-money laundering program. The Fed found that SVB had failed to implement adequate controls and had not conducted sufficient due diligence on certain customers, which could have allowed illegal activities to occur.
SVB's stock price also suffered in early 2021, with a significant drop in February following the announcement of its Q4 2020 earnings report. The report showed a decline in net interest income and lower-than-expected loan growth, which led to concerns among investors about the bank's future prospects.
The roots of SVB’s collapse stem from dislocations spurred by higher rates. As startup clients withdrew deposits to keep their companies afloat in a chilly environment for IPOs and private fundraising, SVB found itself short on capital1. A sequence of events led to SVB’s failure including its selling U.S. Treasuries to lock in funding costs due to expectations of higher rates, resulting in a loss of $1.8 billion. SVB, which did business as Silicon Valley Bank, also had 89% of its $175 billion in deposits uninsured by the end of 2022. The FDIC insures deposits up to $250,000
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