This major US bank (among the top20 commercial banks in USA, with $209 billion in total assets at the end of 2022) failure led Dow Jones more than 300 points lower, closing the day with 1.07% losses. S&P500 followed with 1.45% losses and Nasdaq with 1.76%. In addition, cryptocurrencies got a severe hit, while many other banks’ shares halted due to Friday’s volatility and massive downfalls.
On Wednesday, 8th of March SVB announced that it would need to raise $2.25 billion in capital to offset losses. This had as a result an enormous panic wave among SVB clients, both individual and corporate, to withdraw their money from the bank. The situation got worse on Thursday, and on Friday the 10th was the doomsday.
California regulators placed the bank under the US Federal Deposit Insurance Corporation (FDIC). The Federal government insures deposits up to $250,000. Any deposit above this level is considered uninsured. FDIC needs to find a way now and to proceed paying SVB clients for their insured amounts, while the majority of SVB clients had bigger deposit amounts since they were mainly tech startups and companies.
Another problem is the next day in regards of SVB’s take over. Until now, there is no other bank willing to take over SVB’s assets and present a solid rescue plan.
SVB story has just started but it seems that there is a deep systemic problem at the Financial world and specifically at the banks, from small regional banks to big players. Financial regulation will be once again targeted and SVB’s case is another example that 2008 banking crisis was dealt but not permanently healed.