What kind of bank is Silicon Valley Bank? Silicon Valley Bank, which accepted the "guarantee", reopened its doors and depositors queued up to withdraw money! The following is what kind of bank Silicon Valley Bank is compiled by the editor. If you like, please Collect and share!

What kind of bank is Silicon Valley Bank?

Silicon Valley Bank is a state-chartered commercial bank and a small and medium-sized company focusing on PE/VC and technology enterprise financing. bank. Founded in the United States in 1983, Silicon Valley Bank is a subsidiary of Silicon Valley Bank Financial Group. It has assets of US$5 billion and operates through 27 offices in the United States, 3 international branches and extensive commercial operations in Asia, Europe, India and Israel. The network has provided $2.6 billion in loans to venture capital and entrepreneurial companies. Silicon Valley Bank mainly serves technology-based companies and has successfully helped star companies such as Facebook and Twitter.

Silicon Valley Bank’s 48 hours and 40 years

Thunders, runs, and bankruptcies, Silicon Valley Bank collapsed faster than anyone expected. But few people know that it was also a "top student". This 40-year-old professional technology bank has successfully weathered the California real estate crisis in the 1990s, the bursting of the Internet bubble in 2000, and the subprime mortgage crisis in 2008. In fact, the reason for the flash crash of Silicon Valley Bank was not only the explosion of existing risks, but also the domino effect of this round of aggressive interest rate hikes by the Federal Reserve. "An incredibly difficult 48 hours" was just the straw that broke the camel's back.

“BANKRUN”

Starting from Monday, in Silicon Valley, the technology center of the United States, employees of countless start-up technology companies will not be able to get wages and cannot even afford office rent. The reason is-the famous Silicon Valley Bank (Silicon Valley

Bank) was declared bankrupt.

Li Fan, who works for a start-up new materials company in California, told a Beijing Business Daily reporter, “I woke up on Saturday and was still sighing at the news of the collapse of SVB, but soon I received an email saying that the company’s money It’s all there. The top management held a meeting all morning, but there was still no result from the discussion, as if nothing had happened.”

CompScience, another security analysis start-up, had to suspend spending on marketing, sales and recruitment because it failed to transfer the company's funds, but it is still worried about employee salaries. "Have you ever thought that Silicon Valley Bank would be the one in trouble? Never." said Josh Butler, CEO of CompScience.

Josh Butler.

Everything happened suddenly. After all, on March 7, Silicon Valley Bank officially announced that it was "honored to be on Forbes' annual list of America's Best Banks for five consecutive years."

The turning point occurred on March 8. Later in the day, news broke that it needed to raise $2.25 billion in capital and was forced to sell all of its available-for-sale bonds at a loss of $1.8 billion.

Market concerns arose from this. On March 9, Silicon Valley Bank’s stock price plummeted 60.41%, from US$267.83 per share to US$106.04. According to California regulatory documents, as of the 9th, Silicon Valley Bank customers had withdrawn a staggering $42 billion in one day.

As the stock price continued to fall, Silicon Valley Bank simply gave up selling the stock and began to look for buyers. But that effort failed as a severe lack of funds made the sale process more difficult.

Later on the 10th, the California Financial Protection and Innovation Authority announced that it had legally taken over Silicon Valley Bank, a regional bank that mainly serves start-ups, and assigned the Federal Deposit Insurance Corporation to provide liquidation management for Silicon Valley Bank. , due to insufficient liquidity and solvency of Silicon Valley Bank.

Seeing that there is no hope for withdrawals, many companies have already launched self-rescue. On the website of the American toy store Camp, eye-catching advertisements for full-site promotions have been posted. Since most of the cash was stored in Silicon Valley Bank, which suddenly collapsed, it now had to save itself through a big promotion - a 40% off sale of the entire store, including gift cards.

The copy of the advertising email is, "When your bank collapses, run, don't walk." The promotional code that users need to enter is "BANKRUN (bank run)".

Success or failure lies in Silicon Valley

In the 1960s and 1970s, due to its proximity to famous universities such as Stanford University and the University of California, Berkeley, local tax incentives, government loan guarantees and other preferential policies were superimposed. , Silicon Valley has gradually become a hot spot for knowledge and adventurers, and technology companies have blossomed here.

At that time, technological innovation in Silicon Valley was in a period of rapid development, but traditional banks rarely provided loans and financial services to these emerging companies. At that time, Roger Smith and Bill

Biggerstaff from Wells Fargo, as well as Stanford University professor Robert Medearis keenly captured this opportunity. In 1982, the three jointly founded SVB.

Since then, Silicon Valley Bank has been providing a series of financial services such as loans, venture capital, capital market services, global payments and transactions to innovative companies, providing critical support and assistance to technology companies. . Over the past few decades, Silicon Valley Bank has grown and expanded its operations globally to become one of the world's leading innovative corporate banks.

After 40 years of development, Silicon Valley Bank has helped approximately 30,000 high-tech start-ups achieve financing, established business relationships with more than 600 venture capital institutions and 120 private equity funds around the world, and established a leading position in high-tech start-ups in the United States. The market share in the corporate investment and financing field exceeds 50%. As of the end of 2022, Silicon Valley Bank's total assets are approximately US$209 billion and total deposits are approximately US$175.4 billion.

The higher you fly, the harder you fall. The collapse of Silicon Valley Bank was the second-largest bank failure in U.S. history, second only to Washington Mutual, which collapsed during the 2008 financial crisis.

Why did the "Star Bank" suddenly go bankrupt and close? Behind this is the change in macro liquidity caused by the Federal Reserve's aggressive interest rate hike, which meets the lag in asset and liability management of Silicon Valley Bank and the fragility of its balance sheet.

Yang Haiping, a researcher at the Securities and Futures Research Institute of the Central University of Finance and Economics, told a Beijing Business Daily reporter that the explosion and even collapse of Silicon Valley Bank are directly related to the Federal Reserve's aggressive interest rate hikes. Silicon Valley Bank’s balance sheet bears the brand of science and technology finance. When monetary policy is loose, it is relatively easy for technology startups to raise funds and deposit large amounts of funds in Silicon Valley banks. Silicon Valley Bank has a significant allocation to held-to-maturity fixed income assets.

Yang Haiping further analyzed that, as the Federal Reserve’s aggressive interest rate hikes began, scientific and technological enterprises lacked financing and began to withdraw large amounts of cash from Silicon Valley Bank. This was the reason for the formation of the liquidity gap. In order to fill the liquidity gap, Silicon Valley Bank had to sell its asset portfolio. Since interest rates were already high at this time, the asset sales resulted in large losses. Since then, Silicon Valley Bank has launched a refinancing plan to the market. The market's concerns about its lack of liquidity intensified, resulting in more deposit withdrawals and short selling, and a liquidity crisis broke out.

Venture capital practitioners are also beginning to lament the role investors played in the demise of Silicon Valley banks. Ryan Falvey, a financial technology investor at Restive Ventures, said: "This was a hysterical bank run caused by venture capital firms and will go down in history as a case of the venture capital industry reaping the consequences."

No eggs are left intact

There are too many companies affected by Silicon Valley Bank. Even several large technology companies have suffered considerable losses. According to the Forbes website, 14 companies have disclosed the amount of their deposits in Silicon Valley Bank.

For example, Roku, a streaming media service provider owned by Disney, said that of the company’s $1.9 billion in cash, approximately $487 million (26%) is linked to Silicon Valley Bank. And Roku said the deposits were largely uninsured and it didn't know "to what extent" it would be able to recover them.

Roblox, a video game company known as the "first stock in the metaverse", said that 5% of its US$3 billion in cash is deposited in Silicon Valley Bank, but said that this will not affect the company's operations. Stable currency giant Circle said that of its US$40 billion USD

Coin reserves, US$3.3 billion is in Silicon Valley Bank.

How can the eggs be completed when the nest is overturned? Silicon Valley Bank is not the only one facing this dilemma.

After the closure of Silicon Valley Bank, some investors worried that the incident might affect other financial institutions and even lead to larger financial risks. The Federal Deposit Insurance Corporation has previously warned that the current interest rate environment may have serious consequences for the banking industry, and financial institutions such as U.S. commercial banks may face losses totaling US$620 billion due to the sale or holding of a variety of financial products.

However, Paul Ashworth, chief U.S. economist at market research firm Capital Economics, believes that losses incurred by commercial banks in holding financial products are unlikely to become a systemic problem. Mark Heifer, global chief investment officer of UBS Group Wealth Management, also said that after the closure of Silicon Valley Bank, there have been no signs of spread of risks such as pressure on the interbank market.

Since Silicon Valley Bank previously mainly served start-ups and venture capital institutions, after the bankruptcy incident, American venture capital institutions have expressed support for Silicon Valley Bank, hoping to help the bank avoid bankruptcy and tide over the difficulties.

On Saturday afternoon local time, 125 venture capital institutions, including Sequoia Capital, signed a joint statement calling on Silicon Valley Bank to be acquired by "another entity" so that they can still Be able to maintain business relationships with the bank.

The ripple effects continue, and startups are still struggling. But the bank’s official website still reads its original vision: “Helping individuals, investors, and the world’s most innovative companies realize their ambitions.”

Silicon Valley Bank reopens and depositors queue up to withdraw money

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After opening their doors on Monday, long queues formed in front of various Silicon Valley Bank branches.

The night before, the Federal Reserve, the U.S. Department of the Treasury, and the Federal Deposit Insurance Corporation FDIC announced a "cover" for Silicon Valley Bank, saying that all depositors' rights and interests will be protected.

Even after receiving the reassurance, depositors at Silicon Valley Bank were still eager to move money out of their accounts. On the morning of March 13, local time, all Silicon Valley Bank branches were lined up with customers coming to withdraw money.

At the Sand Hill Road branch of Silicon Valley Bank, many depositors were still lining up quietly waiting to withdraw money. Near this business outlet is a gathering place for Silicon Valley venture capital offices.

Staff at the bank’s branches were also unwilling to be interviewed by the media, but said they could contact the FDIC’s public relations department if they had any questions.

20 Years of Customers Are Disappointed

"I am very disappointed with SVB (Silicon Valley Bank)," said a Silicon Valley Bank private customer who had just completed a transfer at the entrance of Silicon Valley Bank's headquarters. Although he went through the transfer procedures, the staff told him that it would take about a week to arrive.

He said that he was a customer of Silicon Valley Bank 20 years ago. He came to queue before 9 o'clock today. The operation process at the counter took about 20 minutes. "Looking at such a long queue, I guess it can be done in one day." Not a few."

“I think the government officials who took over are behind this. On the one hand, they say there is no problem with the money, and on the other hand, they are slowing down everyone’s withdrawal speed.” He said.

According to the FDIC announcement, Silicon Valley Bank customers can choose to operate their accounts online. However, some depositors were worried that online operations would encounter congestion and it would take a long time for transfers to arrive in their accounts, so they chose to collect cash checks at the on-site business hall as soon as possible.

Some depositors even brought suitcases to the bank door. When asked if she was carrying cash, she did not respond.

Silicon Valley Bank’s depositors are mainly corporate users. Previously, media reported that more than half of start-ups with VC background in the United States are using the services of Silicon Valley Bank.

According to announcements published on the official website of the U.S. Securities and Exchange Commission, more than 60 listed companies have disclosed that they have deposits in Silicon Valley Bank, and the risk exposure of most companies is less than 10% of all cash assets. However, a large number of Silicon Valley startups use Silicon Valley Bank as their main bank, store their funds here, and use Silicon Valley Bank's credit cards to pay for the company's daily expenses. The Silicon Valley Bank outburst has directly affected the liquidity of these companies.

Relevant people from Point, a financial technology startup located in Palo

Alto, told the Associated Press that the company’s finance staff went to Silicon Valley Bank early in the morning to collect the cash check and sent a mass notification to employees. Previously, everyone was worried that the crisis at Silicon Valley Bank would directly affect the payment of wages that month, but now they are finally relieved.

“For companies, if payroll (payment of wages) is not fulfilled, in theory, employees can sue the company.

Therefore, some companies would even choose to fire employees. ” He said.

Regional banks are still under heavy pressure

In order to prevent the Silicon Valley banking crisis from spreading to the technology industry and the financial system, the Federal Reserve announced its measures on the evening of March 12, local time. Silicon Valley Bank and another closed bank Signature Bank's backing commitment

The Federal Reserve launched a bank term financing program to provide one-year borrowings to eligible depository institutions to help banks. The U.S. Treasury Department will allocate US$25 billion to support the rescue plan. After the news came out, S&P 500 futures immediately rose by 1.4% that night, and Nasdaq 100 futures rose by 1.5%. However, after the U.S. stock market opened on Monday, market confidence was not in the banking sector. Continuing. First Republic Bank (First Republic

Bank) once plunged 70% (PacWest Bancorp), Alliance Western Bank (Western Alliance

Regional bank stocks such as Bancorp and Charles Schwab Corp. all fell by double digits and had multiple circuit breakers.

At the close, the Philadelphia Stock Exchange's KBW Bank Index closed lower. 11%. First Bank fell 61.83%, Alley West Bank fell 47.06%, Bank of Hawaii fell 18.35%, Charles Schwab fell 11.57%, and Westpac United Bank fell 21.05%. Some analysts say that investors are worried that these regional banks, which are not subject to the same regulatory scrutiny as large banks, also have structural problems similar to Silicon Valley banks.