What is Silicon Valley Bank?

SVB is a publicly traded bank based in Santa Clara, Calif. — the heart of Silicon Valley. It is federally insured, meaning that if it cannot pay depositors, it will get some money from the government. According to its website , SVB works with “nearly half " of venture-backed start-ups in the United States, and its clients include 44 percent of venture-backed tech and health-care companies that went public, including Pinterest and ZipRecruiter. At the end of December, Silicon Valley Bank held around $209 billion in total assets, making this the second-largest failure of a federally insured bank in U.S. history, after Washington Mutual, which collapsed during the financial crisis in 2008.

What happened to the bank?

SVB was holding a high number of Treasury and other government bonds — amounting to more than half of its assets, according to Bloomberg News. As interest rates rose, those bonds became less valuable, and the bank needed to recoup the losses. SVB shares tanked 60 percent on Thursday, after the bank said in a filing a day earlier that it had sold $21 billion in assets and planned to sell some of its stock to raise money. The disclosure sparked panic among tech investors and company founders, who encouraged start-ups to withdraw their money. Others called for calm, however, warning that a bank run could harm the many companies who do business with SVB. Following the sharp decline in shares, trading on SVB stock was halted . Regulators then closed the bank.

What does this mean for the economy?

Concerns over SVB hit banking stocks more broadly on Thursday and Friday. First Republic Bank, which also serves many California tech companies, had fallen around 22 percent on Friday afternoon. Shares of Bank of America had fallen around 1 percent, and Morgan Stanley shares fell over 2 percent on Friday afternoon. Banks are especially sensitive to rising interest rates. With inflation still running hot, the Federal Reserve officials have signaled that they will continue to tighten policy further to get prices under control, but their hawkish stance has heightened fears of a recession. The U.S. government reported Friday that the labor market added 311,000 jobs in February , reflecting its resilience amid rising interest rates despite the Fed’s tightening campaign.

When was the last time a bank failed?

Earlier this month, Silvergate Bank, which did business with the now-bankrupt cryptocurrency exchange FTX, announced that it would be liquidated as regulators probed its dealings with FTX. There were no failures in 2021 and 2022, while four banks failed in 2020, according to the Federal Deposit Insurance Corporation . Those numbers pale in comparison to closures in earlier downturns. On the heels of the Great Recession, bank failures spiked, with 140 failures in 2009, 157 in 2010, and 92 in 2011. Between 2001 and 2022, there were 561 failures total, according to the FDIC.

A bank run occurs when banking customers suddenly try to withdraw their money all at once, causing the bank to lose all of its money — and perhaps leaving it unable to pay some customers. They have insurance protection through the FDIC, a federal agency that insures bank deposits, usually up to $250,000 . Banks that are insured by the FDIC are subject to federal oversight.

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Silicon Valley Bank has collapsed. Here’s what we know.

It marks the second-biggest bank collapse in U.S. history

By Julian Mark

March 10, 2023 at 2:37 p.m. EST

Silicon Valley Bank, lender to some of the biggest names in the tech industry, collapsed on March 10. Regulators moved quickly to avert a meltdown. (Video: Reuters)

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Regulators closed down one of Silicon Valley’s most important banks on Friday, marking the largest bank failure since the Great Recession and the second-biggest in U.S. history.

Earlier in the day, Silicon Valley Bank suspended trading of its plummeting shares and depositors rushed to withdraw their money. As one of the main institutions where start-ups deposited their venture-backed investments, SVB’s failure sent shock waves through the industry. The turmoil comes as the tech companies retrench and shed workers, while rising interest rates spark signs of broader financial distress.

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Here is what to know about SVB, its troubles and its possible impact on the tech sector.

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