[ Tiramisu with TRS SEA - EP4: SVB Financial ]

California regulators on Friday abruptly shuttered Silicon Valley Bank, closing a 40-year-old financial institution that catered to the tech industry and that was the 16th largest U.S. bank before its sudden collapse. The company's stock tumbled 60% on Thursday and had plunged another 70% on Friday before trading of its shares was halted.?

What is Silicon Valley Bank??

Silicon Valley Bank, founded in 1983, expanded quickly with the explosion of companies in the tech-focused area, ultimately reaching more than a dozen states and countries, including Israel, Ireland, and Germany. It was the country's 16th biggest bank, with $210 billion in assets.?Silicon Valley Bank offers business lending products such as loans to help finance acquisitions or projects, touting on its website that it "helps businesses at every stage."

Why was it closed by regulators??

The California Department of Financial Protection and Innovation on Friday said it has taken possession of Silicon Valley Bank. The reason, it said, was "inadequate liquidity and insolvency."

What happens to depositors and clients??

On March 10, the FDIC stated that SVB's clients would have complete access to their insured accounts by Monday morning of the following week at the latest. The sum of uninsured deposits has not yet been determined by the organization. Uninsured savers will, however, get an advance the following week. After the FDIC sells SVB's assets, the receivers of the money in the remaining instances will be given certificates proving they are the rightful owners of the funds.

Why did the bank collapse??

On March 8, Silicon Valley Bank parent SVB Financial Group said that it was taking "strategic actions" including selling almost all of its available-for-sale securities — $21 billion in bonds. It also said it planned to issue stock as part of the plan to raise capital and strengthen its finances.?

SVB, which noted that it would take a $1.8 billion loss on the bond sales, said it needed to take the steps because of higher interest rates and "elevated cash burn levels" by customers. The company also pointed to "pressured public and private markets."

Some of its tech company clients were burning through cash faster than expected in early 2023, Silicon Valley Bank?said?in its March 8 investor letter. That resulted in lower deposits than forecast, according to the bank.

Silicon Valley Bank's problems were exacerbated by rapidly rising interest rates over the last year, which reduced the value of its bond holdings.?

The March 8 announcement spooked investors, sparking concerns that clients would yank funds due to the bank's financial uncertainty, which in turn would limit the bank's ability to tap other liquidity sources, said Brandon King, an analyst at Truist, in a note to investors.

In your opinion, How is this impacting Wall Street and other banks??

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