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Silicon Valley Bank (SVB), has been closed down.
This is because the 16th biggest lender in the United States failed in eleventh-hour attempt to raise new capital after facing $42bn in deposit outflows.
Based in Santa Clara, California with about $209 billion in assets, the startup-focused lender thus became the largest bank to fail since the 2008 financial crisis on Friday, in a sudden collapse that roiled global markets, left billions of dollars belonging to companies and investors stranded.
The phenomenon according to a Reuters report have forced California banking regulators to close the bank.
It has consequently appointed the Federal Deposit Insurance Corporation (FDIC) as receiver for later disposition of its assets.
Specifics of the tech-focused bank's abrupt collapse are said to be a jumble, but the Fed's aggressive interest rate hikes in the last year, which had crimped financial conditions in the start-up space in which it was a notable player, seemed front and center according to reports.
The bank had tried to raise capital to offset fleeing deposits but lost $1.8 billion on Treasury bonds whose values were torpedoed by the Fed rate hikes.
Reports monitored on global television show how customers of the bank unsuccessfully attempt to withdraw their funds, the main office and all branches of Silicon Valley Bank will reopen on March 13 and all insured depositors will have full access to their insured deposits no later than Monday morning according to bank officials.
It is not immediately clear how much of the deposits will be released because 89 per cent of the bank's $175 billion in deposits were uninsured as the end of 2022, according to the FDIC, leaving the fate of customers yet to be determined.
The FDIC is reportedly racing to find another bank over the weekend that is willing to merge with Silicon Valley Bank, according to people familiar with the matter who requested anonymity because the details are confidential.
While the FDIC hopes to put together such a merger by Monday to safeguard unsecured deposits, no deal is certain, the sources told Reuters.
The full assessment of the bank’s failure is yet to be determined but analysts say the development is likely to spread to other banks in India, China, Japan, Germany among others across the globe which have strong links with SVB.
It is the largest US bank to go down since 2008.
Unconfirmed reports have attributed the bank’s failure partly to its overexposure to companies focused on crypto currencies which have woefully failed leaving many with billions in investments to lose their funds.
The bank’s rapid failure ruffled the tech industry, prompting fears that the economic situation for the sector is worse than previously thought.
The collapse is also strengthening calls from analysts and investors that the Federal Reserve’s interest rate hikes are too aggressive and risk causing serious damage to the economy.
The bank expanded rapidly, opening new U.S. offices and adding international ones, too. It now has a presence in nine countries, including China and India. It served a spectrum of small and large tech companies, including e-commerce powerhouse Shopify and cybersecurity company CrowdStrike. Its clients list also included powerful tech founders and executives, as well as storied venture capital firms like Andreessen Horowitz and Insight Partners.
