SVB is the biggest bank failure since the 2008 financial crisis.

March 10, 2010 Startup-focused lender SVB Financial Group ( SIVB.O ) became the biggest bank to fail on Friday since the 2008 financial crisis, leaving billions of dollars worth of companies and investors in a sudden collapse that rocked global markets. Arrested.

California banking regulators closed the bank, which started out as a Silicon Valley bank, on Friday and appointed a receiver for the Federal Deposit Insurance Corporation (FDIC) to dispose of its assets later.

Based in Santa Clara, the lender ranked as the 16th largest in the US at the end of last year, with nearly $209 billion in assets. The details of the tech-focused bank’s sudden collapse were hazy, but the Fed’s sharp rate hike last year appeared to be front and center, weakening financial conditions in the startup space where it’s a prominent player.

As it tried to raise capital to compensate for fleeing depositors, the bank lost $1.8 billion in Treasury bonds, whose value has been eroded by Fed rate hikes.

The collapse of Silicon Valley Bank, Washington Mutual, in 2010. It’s the biggest since the crash of 2008, which triggered a financial crisis that crippled the economy for years. In the year The 2008 disaster led to stricter laws in the United States and beyond.

Since then, regulators have imposed more stringent capital requirements on targeted U.S. banks to ensure that the collapse of an individual bank does not harm the broader financial system and economy.

The main office and all branches of Silicon Valley Bank will reopen on March 13 and all insured depositors will receive their full insurance benefits no later than Monday morning, the FDIC said.

But 89% of the bank’s $175 billion in deposits last year. By the end of 2022, the uninsured, according to the FDIC, will know their fate.

The FDIC will scramble to find another bank willing to merge with Silicon Valley Bank by the end of the week, according to people familiar with the matter, who asked not to be identified because the details are confidential. While the FDIC hoped to coordinate such a merger on Monday to protect uninsured depositors, no deal has been reached, the sources added.

An FDIC spokesman did not immediately respond to a request for comment.

Buyers wanted.

Separately, Silicon Valley Bank’s parent company SVB Financial is working with investment bank Centerview Partners and law firm Sullivan & Cromwell to find buyers for its other assets, including investment bank SVB Securities, wealth manager Boston Private and equity research firm MoffettNathanson, the sources said. These assets may attract competitors and private equity firms, the sources added.

It is unclear if any buyer would step up to buy these assets without SVB Financial first filing for bankruptcy. Credit rating agency S&P Global Ratings said on Friday it expects SVB Financial to enter bankruptcy due to its debt.

SVB did not respond to calls for comment.

Companies such as video game maker Roblox Corp RBLX.N and streaming device maker Roku Inc ( ROKU.O ) said they had hundreds of millions of dollars in deposits in the bank. Roku said its deposit with SVB was largely uninsured, sending its shares down 10% in extended trading.

Tech workers, whose salaries depend on the bank, are also anxious to get their salaries on Friday. A notice was posted on the door of the SVB branch in San Francisco telling customers to call a toll-free number.

Greg Baker, chief executive of SVB Financial, sent a video message to staff on Friday, acknowledging that the 48 hours leading up to the bank’s collapse had been “extremely difficult”.

SVB’s woes show how the campaign by the US Federal Reserve and other central banks to fight inflation, ending the era of cheap money, exposes vulnerabilities in the market. The stress hit the banking sector.

American banks have lost more than $100 billion in stock market value over the past two days, while European banks have lost nearly $50 billion, according to Reuters calculations.

U.S. lenders First Republic Bank ( FRCN.N ) and Western Alliance ( WAL.N ) said on Friday that their cash flows and deposits remained strong, aiming to calm investors as their shares fell. Others, such as Germany’s Commerzbank ( CBKG.DE ), issued unusual statements to reassure investors.

More pain

Some analysts predict more pain in the sector as concerns about hidden risks in the banking sector and its exposure to currency appreciation spread.

Christopher Whalen, chairman of Whalen Global Advisors, said: “There could be a bloodbath next week…short sellers are out there and they are going to attack every bank, especially the smaller banks.”

US Treasury Secretary Janet Yellen met with bank regulators on Friday and said she has “full confidence” in their ability to respond to the issue, the Treasury said.

The White House said on Friday that it had faith and trust in US financial regulators when asked about the SVB collapse.

The genesis of SVB’s decline lies in the rising interest rate environment. Some of SVB’s clients started pulling out as higher interest rates closed the market for many startups’ initial public offerings and made private fundraising more expensive.

To fund the redemptions, SVB on Wednesday sold a $21 billion bond portfolio consisting mostly of U.S. Treasuries, and said it would sell $2.25 billion in common equity and select convertible shares to fill the cash hole.

As of Friday, the fall in prices made it unable to raise capital and the bank tried to look at other options, including a sale, until regulators stepped in and closed the bank, he said.

The last FDIC-guaranteed institution was Almena State Bank in Kansas on October 23, 2020.

Writing by John O’Donnell, Noor Zainab Hussain, Paritosh Bansal; Additional reporting by Niket Nishant, Emma-Victoria Farr, Nathan Frandino, Anna Tong, Krystal Hu, Greg Bensinger, Pete Schroeder, Greg Roumeliotis, Jo Mason, Marc Jones, Iain Withers, Elizabeth Howcroft, Noel Randewich, Yoruk Bahceli, Lananh Nguyen, Eva Mathews and Nupur Anand; Writing by Nick Ziminski; Editing by Toby Chopra, Anna Driver, William Mallard, and Raju Gopalakrishnan

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