This paragraph explains the downfall of Silicon Valley Bank of America. It is a case study type article.
America’s two biggest banks collapsed. The one is Silicon Valley Bank and the other one is Signature Bank. This is the second biggest bank failure in American history. Before this in the year, 2008 the collapse of Washington Mutual Bank was the biggest bank failure. After which we saw the global recession. People are now feared that this banking collapse will bring out the same outcome. If America’s banking system / financial system will collapse its impact will be seen worldwide.
The Silicon Valley Bank
Silicon Valley Bank was established in the year 1983. Its headquarters are in Santa Clara, California. Earlier, to earn more profit this bank use to invest money in the real estate. In the 1990s, half of Silicon Valley bank portfolio was with real estate. When the real estate market clashed in the America this bank faced a huge loss.
In the year 2000s, the bank started to invest in the new startup companies specially the tech companies. Many of these companies were Indian companies also. The Silicon Valley Bank was exclusively working for the tech companies. The problem starts during COVID. In the year 2021 many software technology startups raised a lot of money. As a result, demand deposits in this bank also increased. Now, the bank started to invest money in the Government bonds as well as corporate bonds.
The American Government increased the interest rate in the year 2022 because of inflammation. Due to which many people started to take out their demand deposits to meet their financial needs. To meet the customer needs they started to sell their Bonds in the loss. The Silicon Valley Bank shares also started to fall down. There was a bank run now.
After all this chaos the Silicon Valley Bank receivership was handed over to the FDIC. The Government started to find a bank to merge with this bank. Its major impact is seen on stock market. The US bank stock market is falling. Also the companies whose money was in the Silicon Valley Bank had a downfall in their shares including Indian companies. All this happened because of the bad decisions made by the bank employees.
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