Another Lehman Brothers Moment? All You Need To Know About The Silicon Valley Bank Collapse
At a time when there are growing concerns around the world that 2023 will see a 2008-like or even worse recession, an incident similar to what triggered the financial crisis fifteen years ago has just happened.
Silicon Valley Bank, a four-decade-old US lender, collapsed on Friday, drawing comparisons with the Lehman Brothers going out of business in 2008, taking down the entire world economy.
What happened to Silicon Valley Bank?
Silicon Valley Bank, the nationĄ¯s 16th-largest bank, failed after depositors hurried to withdraw money this week amid anxiety over the bankĄ¯s health.
The bank mainly served technology workers and venture capital-backed companies, including some of the industry's best-known brands.
According to the bank's website, nearly half of the US technology and healthcare companies that went public last year after getting early funding from venture capital firms were Silicon Valley Bank customers.
Silicon Valley Bank's assets seized? ?
Regulators on Friday seized the assets of Silicon Valley Bank as markets fretted over possible contagion from the biggest banking failure since the 2008 financial crisis.
California regulators closed down the tech lender and put it under the control of the US Federal Deposit Insurance Corporation (FDIC).
Silicon Valley Bank had 17 branches in California and Massachusetts.?
How customers will be refunded?
The FDIC is acting as a receiver, which typically means it will liquidate the bank's assets to pay back its customers, including depositors and creditors.
The assets of the Silicon Valley Bank have been transferred to the newly-created Deposit Insurance Bank of Santa Clara. The new bank will start paying out insured deposits on Monday. Then the FDIC and California regulators plan to sell off the rest of the assets to make other depositors whole.
All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023, read the FDIC statement.
The FDIC said the bank had $209 billion in assets and $175 billion in deposits at the time of failure.
Following the developments in the US, the Bank of England said on Friday that it was seeking a court order to place Silicon Valley Bank UK Limited into an insolvency procedure.
Under insolvency proceedings for banks in Britain, some depositors are eligible for up to 85,000 pounds ($102,000) of compensation for lost deposits or 170,000 pounds for joint accounts.
Other assets and liabilities would be managed by the bank's liquidators and any funds recovered would be passed on to creditors, the BoE said.
May not result in another 2008
Silicon Valley Bank was the second biggest bank failure in US history after the collapse of Washington Mutual in 2008.
While the collapse of Silicon Valley Bank is bad news for the economy and the banking sector, many analysts believe that it will not lead to a 2008-like crisis affecting the entire industry.
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