What kind of bank is Silicon Valley Bank?
Silicon Valley Bank is a state-chartered commercial bank and a small and medium-sized bank focusing on PE/VC and financing of technology-based enterprises. Silicon Valley Bank 1983 was established in the United States on 1983. It is a subsidiary of Silicon Valley Bank Financial Group with assets of US$ 5 billion. Through 27 offices in the United States, three international branches and extensive business networks in Asia, Europe, India and Israel, it has provided $2.6 billion in loans to venture capital and start-ups. Silicon Valley Bank mainly serves technology-based enterprises and has successfully helped star enterprises such as Facebook and twitter.
Silicon Valley Bank 48 hours 40 years
Thunder, bank runs, bankruptcies, and the collapse of Silicon Valley banks exceeded everyone's expectations. But few people know that it used to be a "top student". This 40-year-old professional technology bank successfully survived 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 flash collapse of Silicon Valley banks is not only the outbreak of existing risks, but also the domino effect of the Fed's aggressive interest rate hike this round. Incredibly Hard 48 Hours is just the last straw to crush the camel.
“BANKRUN”
Starting from Monday, in Silicon Valley, the technology center of the United States, there will be countless employees of start-up technology companies who can't get paid or even pay office rent. The reason is-the famous Silicon Valley Bank.
The bank was declared bankrupt.
Li Fan, who works for a new materials company in California, told beijing business today Today, "I woke up on Saturday and still lamented the news that SVB was closed. As a result, I received an email soon, saying that all the company's money was there. There was a morning meeting at the top, but the results were still not discussed, as if nothing had happened. "
CompScience, another security analysis startup, had to suspend spending on marketing, sales and recruitment because it failed to transfer company funds, but it was still worried about employees' salaries. "Have you ever thought that the accident will be the Silicon Valley Bank? Never. " Ceo of CompScience
Josh Butler said.
Everything came suddenly. After all, on March 7th, Silicon Valley Bank officially announced that it was "honored to be on Forbes' list of the best banks in America for five consecutive years".
The turning point occurred on March 8. Later that day, it was reported that it needed to raise $2.25 billion and was forced to sell all bonds available for sale, with a loss of $654.38+$80 million.
Market worries arise from this. On March 9th, the share price of Silicon Valley Bank plummeted by 60.4 1%, from $267.83 to 106.04. According to California regulatory documents, as of the 9th, Silicon Valley bank customers withdrew an astonishing $42 billion in one day.
As the share price continued to fall, Silicon Valley Bank gave up selling shares directly and began to look for buyers. However, due to the serious shortage of funds, the sale process was difficult, and this effort also failed.
Later 10, California Financial Protection and Innovation Agency announced that it would take over Silicon Valley Bank, a regional bank mainly serving start-ups, and appointed the Federal Deposit Insurance Corporation to conduct liquidation management of Silicon Valley Bank, because the liquidity and solvency of Silicon Valley Bank were insufficient.
Seeing that there is no hope of withdrawing cash, many companies have saved themselves. On the website of Camp, an American toy store, eye-catching full-court promotional advertisements have been put out. Since most of the cash is in the suddenly closed Silicon Valley Bank, now it has to save itself through a big promotion-60% off sales, including gift cards.
The copy of the advertisement email is "When your bank goes bankrupt, run, don't go". The promotion password that users need to enter is "BANKRUN".
Success or failure lies in silicon valley
In the 1960s and 1970s, due to its proximity to famous institutions of higher learning such as Stanford University and University of California, Berkeley, as well as preferential policies such as local taxation and government loan guarantees, Silicon Valley gradually became a hot spot for knowledge and adventurers, and technology companies blossomed everywhere here.
At that time, the technological innovation in Silicon Valley was in a period of rapid development, but traditional banks rarely provided loans and financial services to these emerging enterprises. At that time, roger smith and Bill of Wells Fargo.
Biggerstaff and Stanford University professor Robert Medearis seized this opportunity keenly. 1982, SVB was founded by three people.
Since then, Silicon Valley Bank has been providing innovative enterprises with a series of financial services, such as loans, venture capital, capital market services, global payments and transactions, and providing key support and assistance to technology enterprises. In the past few decades, Silicon Valley Bank has grown globally and become one of the leading innovative corporate banks in the world.
After 40 years of development, Silicon Valley Bank has helped about 30,000 high-tech start-ups, established business ties with more than 600 venture capital institutions and 120 private equity funds around the world, and has a market share of over 50% in the investment and financing field of high-tech start-ups in the United States. By the end of 2022, the total assets of Silicon Valley banks were about $209 billion, and the total deposits were about $6,543.8+$075.4 billion.
The higher you fly, the heavier you fall. The collapse of Silicon Valley Bank is the second largest bank failure in American history, second only to Washington, which collapsed in the 2008 financial crisis.
Mutual Bank (Washington Mutual Bank).
Why did the "star bank" suddenly go bankrupt? Behind this is the macro liquidity change caused by the Fed's aggressive interest rate hike, which satisfies the lag of asset-liability management and the fragility of the balance sheet of Silicon Valley banks.
Yang Haiping, a researcher at the Securities and Futures Research Institute of the Central University of Finance and Economics, told the beijing business today reporter today that the thunder and even bankruptcy of Silicon Valley banks are directly related to the Fed's aggressive interest rate hike. The balance sheet of Silicon Valley Bank bears the brand of technology and finance. In the case of loose monetary policy, it is relatively easy for technology-based enterprises to raise funds and deposit a large amount of funds in Silicon Valley banks. Silicon Valley banks have allocated a large number of fixed-income assets held to maturity.
Yang Haiping further analyzed, however, with the aggressive interest rate increase by the Federal Reserve, technology companies lacked financing and began to withdraw a large amount of cash from Silicon Valley banks, which is the reason for the liquidity gap. In order to fill the liquidity gap, Silicon Valley banks had to sell their portfolios, and because interest rates were already at a high level, asset sales caused huge losses. Since then, Silicon Valley Bank has launched a refinancing plan to the market. The market's concern about its lack of liquidity has intensified, leading to more deposit withdrawals and shorting, and the liquidity crisis broke out.
Venture capitalists also began to lament the role of investors in the collapse of Silicon Valley banks. Ryan is a financial technology investor in Restive Ventures.
Farway said: "This is a hysterical bank run triggered by venture capital companies, which will go down in history as a case of the venture capital industry eating its own fruit."
Birds that nest don't lay eggs ―― No member can escape the disaster of the group.
There are too many companies affected by Silicon Valley banks. Even several large technology companies have suffered a lot. According to Forbes.com, 14 companies have disclosed their deposits in Silicon Valley banks.
For example, Roku, a streaming service provider owned by Disney, said that about $487 million (26%) of the company's $654,380.9 billion in cash was related to Silicon Valley Bank. Moreover, Roku said that these deposits are basically uninsured, and it is not known to what extent they can be recovered.
Roblox, a video game company known as "the first stock in the super universe", said that 5% of its $3 billion in cash was in Silicon Valley Bank, but said that this would not affect the company's operation. Circle, a stable currency giant, says its $40 billion
In Coin's reserves, there are $3.3 billion in Silicon Valley Bank.
How can there be eggs under the nest? It's not just Silicon Valley banks that are facing this dilemma. After the closure of Silicon Valley Bank, some investors worried that this incident might spread to other financial institutions and even lead to greater 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 commercial banks in the United States may face a total loss of $620 billion due to the sale or holding of various financial products.
However, Paul ashworth, chief American economist of Kaitou Macro, a market research organization, believes that the loss of financial products held by commercial banks is unlikely to become a systemic problem. Mark Hefer, global chief investment officer of wealth management at UBS Group AG Group AG, also said that after the collapse of Silicon Valley Bank, there was no sign of risk spread such as pressure in the interbank market.
Since Silicon Valley Bank previously mainly served start-ups and venture capital institutions, after the bankruptcy incident, American venture capital institutions expressed their solidarity with Silicon Valley Bank, hoping to help the bank not go bankrupt and tide over the difficulties.
On Saturday afternoon local time, 125 venture capital institutions, including Sequoia Capital, signed a statement calling on Silicon Valley Bank to be acquired by "another entity" so that they can still maintain business relations with the bank.
The chain reaction continues, and startups are still struggling. But the original vision of the bank is still written on official website: "helping individuals, investors and the most innovative companies in the world realize their ambitions."
Silicon Valley Bank reopened and depositors lined up to withdraw money.
After the opening on Monday, there was a long queue in front of all the business halls of Silicon Valley Bank.
The night before, the Federal Reserve, the US Treasury Department and the Federal Deposit Insurance Corporation (FDIC) announced that they would "cover the bottom" for Silicon Valley Bank, saying that they would guarantee the deposit rights of all depositors.
Even after being guaranteed, depositors of Silicon Valley Bank can't wait to transfer money out of their accounts. In the early morning of March 13 local time, the business hall of Silicon Valley Bank was full of customers who came to withdraw money.
In the business hall of Shashan Road of Silicon Valley Bank, there are still many depositors quietly waiting in long queues for withdrawal. Near the business outlets, it is the gathering place of Silicon Valley venture capital offices.
The staff of bank outlets are also unwilling to be interviewed by the media. They just said they could contact the public relations department of FDIC if they had any questions.
20 years of customer disappointment
"I am very disappointed with SVB (Silicon Valley Bank)," said a private customer of Silicon Valley Bank who just completed the transfer. Although he has gone through the transfer formalities, the staff told him that it would take about a week to get the account.
He said that he was a customer of Silicon Valley Bank 20 years ago and came to the queue before 9 o'clock today. The operation at the counter takes about 20 minutes. "If you look at such a long queue, it is estimated that you can't do a few in one day."
"I think the government officials who took over are behind the scenes. On the one hand, they say that the money is ok, on the other hand, they slow down the withdrawal speed. " He said.
According to the FDIC's notice, customers of Silicon Valley Bank can choose to operate their accounts online. However, some depositors are worried that the online operation will be blocked and the transfer time will be long, so they choose to collect the cash check at the on-site business hall at the first time.
Some depositors even came to the bank door with suitcases. When asked if she had any cash, she didn't answer.
The depositors of Silicon Valley Bank are mainly corporate users. Earlier, some media reported that more than half of VC-backed startups in the United States were using the services of Silicon Valley Bank.
According to the announcement issued by official website of the US Securities Regulatory Commission, more than 60 listed companies have disclosed that they have deposits in Silicon Valley banks, and the risk exposure of most companies is less than 65,438+00% of all cash assets. However, a large number of Silicon Valley start-ups regard Silicon Valley Bank as the main bank, deposit their funds there, and use the credit card of Silicon Valley Bank to pay the daily expenses of the company. The thunderstorm of Silicon Valley banks directly affected the liquidity of these enterprises.
Located in Palo
A related person from Point, an Alto financial technology startup, told Cailian that the financial department of the company went to Silicon Valley Bank to collect cash checks early in the morning and informed employees in groups. Before, everyone was worried that the crisis of Silicon Valley Bank would directly affect the monthly salary payment, but now they are finally relieved.
"For enterprises, employees can theoretically sue the company if they don't execute the payroll. Therefore, some companies may even choose to fire employees. " He said.
Regional banks are still under pressure.
In order to prevent the Silicon Valley banking crisis from spreading to the technology industry and financial system, the Federal Reserve announced the signatures of Silicon Valley Bank and another failed bank on the evening of March 12 local time.
The promise of the bank.
The Federal Reserve launched a regular bank financing plan to provide one-year loans to eligible depositors to help banks meet the needs of all depositors, and to eliminate the pressure on depositors to sell securities assets urgently by supplementing liquidity. The US Treasury will allocate $25 billion to support the plan.
After the news of the rescue came out, Standard & Poor's 500 index futures rose 1.4% and Nasdaq 100 index futures rose 1.5% that night.
However, after the US stock market opened on Monday, market confidence did not last in the banking sector. * * * and Bank of China (First Republic
Bank) once plunged 70%. PacWest Bancorp, western shipping union
Bancorp), Charles Schwab and other regional banking stocks all fell by double digits and were blown many times.
At the close, the KBW Bank Index of Philadelphia Stock Exchange closed down more than 1 1%. The first * * * and the bank fell by 6 1.83%, the Allern West Bank fell by 47.06%, the Hawaiian Bank fell by 18.35%, charles schwab fell by1.57%, and the Western Pacific Union Bank fell by 21.
Some analysts said that investors are worried that these regional banks that are not subject to regulatory review like big banks also have structural problems similar to those of Silicon Valley banks.