Silicon Valley Bank (SVB) is a commercial bank that provides financial services to technology, life science, and venture capital industries. The bank was founded in 1983 and is headquartered in Santa Clara, California.
Silicon Valley Bank offers a range of services, including corporate , investment , private, and asset management. The bank provides loans, lines of credit, cash management services, foreign exchange services, and other financial products and services to its clients.
Silicon Valley Bank is known for its expertise in the technology and innovation sector, and has worked with some of the most successful companies in this space. It has offices in major technology hubs around the world, including in the United States, United Kingdom, China, and Israel.
Silicon Valley Bank is publicly traded on the Nasdaq stock exchange under the ticker symbol “SIVB”.
Bank of Silicon Valley
Despite extraordinary measures taken by governments on both sides of the Atlantic to maintain confidence in the banking system, the collapse of Silicon Valley Bank has put severe pressure on global financial markets.
HSBC stepped in to buy the UK arm of the failed technology lender after a deal that was brokered by the British government and the Bank of England, on a day that brought back memories of the 2008 financial crisis. The US president, Joe Biden, attempted to restore calm by insisting that the US banking system remained safe.
“Americans can have certainty that the financial framework is protected,” Biden said in a proclamation from the White House. ” We will not stop there; we will do whatever is necessary. Your deposits are safe.
However, a crisis of confidence in global markets regarding the health of the financial system caused shares of banks in the United States and Europe to sell off sharply. Investors scrambled for safe-haven assets, driving up the price of government bonds. Economists speculated that the volatile market conditions could force the world’s most powerful central banks to stop raising interest rates.
In the midst of a flurry of speculation regarding the potential for contagion, shares of regional American lenders were sent into a tailspin, with the California-based First Republic Bank’s more than 60% decline in value and similar double-digit declines for lenders such as Western Alliance Bancorp and PacWest Bancorp.
Moody’s, a rating agency, downgraded the debt ratings of the defunct Signature Bank to junk status on Monday, as well as the ratings of six other US banks.
First Republic Bank, Zions Bancorporation, Western Alliance Bancorp, Comerica Inc., UMB Financial Corp., and Intrust Financial Corporation were the banks under consideration for downgrading.
Moody’s, which gave Signature Bank’s subordinate debt a “C” rating, said it was also dropping the bank’s future ratings.
Even though the US benchmark S&P 500 index and Dow Jones industrial average both increased by approximately 0.5 percent, the KBW banks index, which includes the largest American banks, lost more than 10 percent.
Barclays and Standard Chartered saw their share prices plummet by more than 6% in London, where the biggest banks in the UK are headquartered. The FTSE 100 plunged by 2.5 percent, the largest one-day drop since the summer, as markets across Europe sharply sold off.
Silicon Valley Bank and its Analysis
Nevertheless, despite the US Federal Reserve’s backstop plan, which was announced on Sunday night to provide government backing for the money of US depositors, analysts warned that additional measures may be required to maintain the fragile confidence in the banking system.
The Wall Street hedge fund investor Bill Ackman applauded the efforts made to restore confidence, despite his tweet warning that more banks would likely fail: We would have seen a bank run similar to one that occurred in the 1930s continue early on Monday, causing enormous economic harm and hardship to millions if [US regulators] had not intervened today.
“More banks will probably fizzle in spite of the mediation, yet we presently have an unmistakable guide for how the gov’t will oversee them.”
A second bank, Signature, based in New York, was shut down on Sunday by US regulators. The intervention by the Fed protects depositors in Signature and Silicon Valley Bank, as well as anyone else who encounters difficulties, but investors in both have been wiped out.
The financial system is reacting to the rapid increase in interest rates initiated by the US Fed and other major central banks in response to sky-high inflation, which is causing the meltdown at Silicon Valley Bank and pressure on other regional American banks.
According to London-based analysts at Capital Economics, the situation remained fluid, but they suggested that the US financial system and the global financial system as a whole were better able to withstand market turmoil than they were during the 2008 financial crisis when Lehman Brothers went bankrupt.
“However, it delineates the degree to which weaknesses are prowling in the monetary area and reinforces the case for national banks to practice alert in raising rates further as the impacts of strategy fixing so far become evident,” they said.
Analysts at Goldman Sachs stated that they no longer anticipated the Federal Reserve raising rates later this month due to the emergence of casualties in its fight against high inflation in a financial system accustomed to cheap money.
On Monday, the expectations of the financial market for significant additional rate increases from the Bank of England and the European Central Bank decreased as well.