Qubit: SVB 2nd Biggest Bank Failure
Silicon Valley Bank was the second biggest bank failure in the history of bank failures.
Customers withdrew $42 billion in a single day, on the very day that a bank run rumor circulated through email, Twitter, and WhatsApp. SVB was shut down on Friday.
There were concerns initially that startups would miss payroll this week because they would not have access to their cash. But the FDIC announced on Sunday that all deposits, whether insured or uninsured, would be fully backstopped. Now there is a bridge bank that will operate SVB as a going concern.
What's missed in all of this is that SVB was one of the largest conduits for all the money deployed to startups for decades. That capital was raised from institutional investors such as endowments, foundations, and retirement funds to invest in those startups. That cash belonged to their investors and it was held in the bank to pay startup expenses such as people's salaries.
I doubt any beneficiary of those institutional funds - students, grantees, and retirees - would have tolerated a haircut on their cash (i.e., invested capital) through no fault of their own.
Fortunately, that's no longer a concern.
“Silicon Valley Bank cratered at warp speed—and within the last week, two other institutions have folded as well.
One of these, Signature Bank, is the third-largest bank casualty in U.S. history. The other is Silvergate Capital, a bank that announced it would close operations and return assets to depositors. This bank was highly exposed to the crypto sector.
While emergency measures were taken by U.S. banking regulators to stem contagion risk, many are left wondering what could happen next. With data from the Federal Deposit Insurance Corporation (FDIC), the graphic [below] charts over 500 bank failures since 2001.”
Source:
The Largest U.S. Bank Failures in Modern History
Update from Silicon Valley Bridge Bank CEO
Silicon Valley Bridge Bank, N.A. in Operation – Details for Counterparties
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