What Happened to Silicon Valley Bank, the Bank That Collapsed and Keeps Wall Street on the Edge

The shares of SVB, whose operating segments include Bank of Silicon Valley, they fell more than 60% on Thursday, their listing on Wall Street was suspended and finally the State of California ordered the closure of the financial institution. The collapse came after a failed attempt to recapitalize the bank specializing in financing the technology sector was revealed and its fall dragged down the shares of other financial stocks.

The S&P 500 banking index plunged 7.5% on Thursday in its biggest one-day drop in more than two years, as investors fled the sector following the news of the SVB stock placement Financial Group and crypto bank Silvergate’s decision to shut down operations.

SVB is a crucial lender for start-ups and is the banking partner of nearly half of America’s healthcare and technology companies backed by venture capital which went public in 2022.

1) The financing request is contracted. The cooling of the financing market is a consequence of the inexorable rise in borrowing costs by the Federal Reserve over the past year, as well as the high level inflation.

2) Investor risk aversion. Private equity investors are also more reluctant to write big checks due to stock market crashincluding stocks of high-flying technology companies.

3) Lack of cash. SVB is facing cash burn due to falling deposits from start-ups – start-ups – which face a shortage of venture capital funding.

4) Fears of the stock sell-off. The bank was forced to carry out a forced sale of securities worth 21,000 million dollars on Wednesday 8, which led to losses of 1,800 million dollars and led to a 60% drop in its shares on Wall Street.

5) Cascading effect on the banking sector. San Francisco-based First Republic fell 16.5% after hitting its lowest level since October 2020. First Republic and SVB were the biggest losers in the S&P 500 by percentage on Thursday, while the loss of JPMorgan outperformed any other S&P 500 stock at 1.9%. drop.

The SPDR S&P regional banking ETF fell more than 8% to its lowest level since January 2021. Big US banks were also affected, with JPMorgan and Bank of America falling more than 5% and 6% respectively.

“The Silicon Valley Bank crash made everyone nervous about capital levels and what deposits are doing. A lot of institutional investors don’t feel very comfortable holding shares in certain banks right now,” he said. Reuters RJ Granthead of trading at Keefe, Bruyette & Woods in New York.

“People are freaking out because Silicon Valley has always been a very strong, well-run bank. If they’re having trouble now, people are wondering what happens to other banks that are lesser quality and don’t have the reputation of Silicon Valley Bank,” Grant said.

“The current pressures facing SVB are highly idiosyncratic and should not be viewed as extrapolating to other banks,” the analysts said. Manan Gosalia and Betsy Graseck in a note from Morgan Stanley, quoted by the chain CNBC.

german fermohead of strategy for the IEB (Investing in the Stock Market) group explained that “a small North American bank, the SVB, is about to fall, which is an entity that is mainly dedicated to the financing of capital- risk. Yesterday he had to liquidate a portfolio of $21,000 million of securities, with a lot of losses. He had to finish it because he had liquidity problems and it was negative at 65%. It’s a ” mini black swan “turning around and somehow making the market very negative.”

Investors also had to deal with the decline Silvergate Capitala cryptocurrency-focused lender, whose shares fell 22% after announcing late Thursday that it plans to scale back operations and a voluntary liquidation after suffering losses following the cryptocurrency market crash FTX. Shares of Signature, in the same industry as Silvergate, fell 9.3%.

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