In a shock move, the California Department of Financial Protection and Innovation has seized Silicon Valley Bank, marking the second-largest bank failure in US history.
The failure was caused by mass withdrawals from customers, which led to the bank filing a $1.8 billion loss. It is the largest bank failure since the Great Recession and the first FDIC-insured bank to fail in more than two years.
Silicon Valley Bank, headquartered in Santa Clara, has long been popular in the startup, venture capital, and crypto ecosystem. However, the bank’s troubles began when it suffered mass withdrawals from its customers, which it was unable to sustain.
The bank’s parent company, SVB Financial (SIVB), has seen its stock price plummet 70% from a high of $347.21 on March 2 to its current price of $106.08.
The failure of Silicon Valley Bank is a significant blow to the financial sector, especially given the bank’s importance in the tech and venture capital industries.
The last major bank collapse in the United States was the 2008 failure of Washington Mutual, and the industry has worked hard to avoid a repeat of that event.
While the failure is undoubtedly a setback for Silicon Valley Bank’s customers and employees, it is hoped that the industry can learn from the event and take steps to prevent similar incidents in the future.
