By Promise Eze
Last week Friday, the United States regulators shut down Silicon Valley Bank on Friday, marking the biggest bank failure since the 2008 recession. It sent shockwaves across the world.
The closure was triggered by a bank run that began after the bank announced that it lost $1.8 billion in the sale of treasuries and securities. Without clear communication, many customers took those losses as a sign to take their money out of the bank.
Here are some interesting facts to know about Silicon Valley Bank which came crashing within 24 hours
1. Silicon Valley Bank (SVB) was a commercial bank headquartered in Santa Clara, California. SVB was the 16th-largest bank in the United States at the time of its failure on March 10, 2023, and was the largest bank by deposits in the US.
2. SVB was founded by former Bank of America managers Bill Biggerstaff and Robert Medearis who came up with the idea over a game of poker.
3. It provides multiple services to venture capital, private equity firms in addition to offering private banking services for high net-worth individuals
4. The Bank’s clients include household names like Shopify, Pinterest.
5. During the funding boom of 2021, SVB amassed large deposits — $189 billion, which later peaked to a massive $198 billion
6. It later invested heavily in bonds, which were being issued in a lowinterest rate scenario. SVB’s balance sheet for 2022-end showed $91.3 billion of securities
7. In 2022, the US Federal Reserve started raising interest rates, which drove down the value of bond holdings issued at lower rates
8. Rising interest rates also led to venture capital firms cutting fewer and smaller cheques to startups triggering a funding winter
9. As funding depleted, deposits made by startups in institutions such as SVB also started declining, forcing the bank to sell securities at a loss to cover up.
10. On Wednesday, SVB announced it had sold $21 billion worth of bond assets at a loss of $1.8 billion. SVB also said it was raising $2.25 billion via a share sale.
11. On Friday, Silicon Valley Bank, the bank of choice for most startups and venture capitalists, was shut down by the Federal Deposit Insurance Corporation (FDIC).
12. The closure was triggered by a bank run that began after the bank announced that it lost $1.8 billion in the sale of treasuries and securities
13. It has been argued that this may affect tech startups in Nigeria too.
14. But there are signs that the effects may not be as wide-ranging as feared. Many observers have noted it was challenging for Africa-based startups to open accounts in the bank. The situation will get more apparent over the next few weeks, and it will become clearer to measure the effect of SVB’s closure on African startups.
