This is going to be big - Silicon Valley Bank (SIVB) has collapsed.
Silicon Valley Bank has been heavily involved in financial operations in the Silicon Valley, both with start-ups and more established companies.
Silicon Valley Bank shutdown: How it happened and what comes next (nbcnews.com)
Impact?
Largest bank collapse since the financial crisis. SIVB was likely a Top 25 bank in the US prior to this news.
Stay tuned
Reportedly #16 in terms of size, but it served a niche market: VC and startup companies in Silicon Valley. Possible some startups will go belly-up as a result, but VC funders expect some failures. However, this would be a novel way for the businesses to be forced to close. The bank went bust and there was no (worthwhile) insurance.
Second, I think. Silvergate announced voluntary liquidation on Thursday.
It has a big impact on crypto stuff as it was the only bank that was extremely happy to engage with that community.
SIVB on the other hand has a lot of interaction with tech startups as you note. Indeed on their website you can see which tech companies are exposed to trouble here. Approx 90% of their accounts are over the 250k compensation limit and may not receive full compensation. Overall, 16th biggest bank in the US just collapsing suddenly is an interesting event.
I imagine this will be a very exciting, career-shaping weekend for many bankers and tech startups. Next week will be quite interesting.
Ok, fair point. Maybe I should have titled it – 1st FDIC-insured bank collapse of 2023.
I mean, sure, two banks collapsed. But, there is a slight difference in their situations.
Silicon Valley Bank is a very American mess
summary: This article look at what went wrong with SVB. It suggests the rules set up to prevent a 2008 re-run were not put in place at smaller American banks.
“So the Fed adopted a rule under which only the very largest international banks were subject to the full Basel NSFR requirements (several of those large banks are actually holding companies for foreign institutions). It adopted a second tier, under which the ratio only had to be 85%, and a third tier where it was calibrated to 70%. And even then, the majority of US banks are not required to follow the NSFR or LCR standards at all.”
FT well worth a subscription.
from the website
“Key to the growth of the digital asset industry.”
“A striking stance in the staid world of banking.”
“The go-to bank for the cryptocurrency industry.”
The big problem for the global financial system is crypto did not bring the bank down. US paper did.
Deserves its own thread…
Interesting. Where do you find this information?
Per my concern in the OP, anecdote of fall-out from SIVB collapse-- a bank customer with $10M stuck in SIVB runs into problems.
If this is right it’s going to hurt!
Only 2.7% of Silicon Valley Bank deposits are less than $250,000.
Meaning, 97.3% aren’t FDIC insured.
Ouch.
Will those with over the FDIC insurance limit get the first $250,000 under the scheme?
They are ALL insured but only to $250,000.
The Captain
Considering the customers of SIBV are (to a large extent) companies, unless they have spread their company cash across a large number of insured accounts < $250k, it’s fair to assume the $250k might not mean much.
And consider, if you are a startup with $500k in the bank, and you lose $250k, well, that just halved your runway overnight.
Before you all start panicking, you might want to take a look at the SVB numbers I posted here.
Short story - My back of the envelope is that depositors might lose 2%-3% of their deposits. Painful, but hardly game changing.
–Peter
@Peter - I hear what you are saying. But, in the interim, I suspect there will be more stories similar to the one I posted earlier (FarmboxRx).
Here’s an additional link–
From wine country to London, Silicon Valley Bank’s failure shakes worldwide | Watch (msn.com)
Roku has alternatives in the interim. Not so sure other SIVB depositors are in a similar position.
