Global crisis.. after Withdraw $42 billion from Silicon Valley Bank

The echoes of the US Silicon Valley Bank crisis are still reverberating, even after imposing a receivership on the bank, to control the market collapse.

  The banking sectors in the world almost entered into a new historic crisis, due to the collapse of the Silicon Valley Bank, which focuses on technology companies, after depositors withdrew about $ 42 billion in hours, despite the small number compared to the US economy.

The $42 billion withdrawal sparked the Silicon Valley crisis

The volume of attempts to withdraw funds and deposits in the 8 March 2023 from the American Silicon Valley Bank led to an exhaustion of liquidity and ways to obtain it from the bank.

 This prompted the bank to sell a portfolio of securities worth about $27 billion.

Investors and depositors attempted to withdraw $42 billion from a Silicon Valley bank last Thursday, in one of the largest US bank collapses in more than a decade.

In one of the largest US bank collapses in more than a decade. The bank's liquidity balance at the end of the March 9 business day amounted to negative 958 million dollars, which reflected the wave of deposit withdrawals witnessed by the bank.

Tactical error 

  “New York Times” said that the Silicon Valley Bank collapse crisis was due to tactical errors from the bank’s management, which preferred to sell $21 billion in bonds at a loss of $1.8 billion. It is due at a later date.

At the same time, she was trying to raise new capital from the venture capital firm General Atlantic.

The bank was supposed to reassure investors with equity financing, but surprised the market by selling bonds, so much so that it led the bank's very savvy client base of venture capitalists to direct their portfolio clients to withdraw their deposits collectively.

The reason for the failure of the Silicon Valley Bank, is the bank run. The company was not facing risks, at least until customers began rushing to get out of their deposits, because banking companies are institutions that depend on trust as much as they depend on money, and if investors lack confidence, the crisis will come.

The crash, which occurred because management got it wrong in how it communicated with its customers and the public, and created a trust vacuum, could have been avoided, but the company has invested its deposits in low-interest bonds it keeps on its books, on a hold-to-maturity basis, bonds the bank did not They need to be sold, which gave investors a distorted view and made them lose confidence.

protect insured deposits

The California Financial Protection and Innovation Authority decided to close a Silicon Valley bank due to its liquidity problems, amounting to insolvency, noting that it had established a bank in Santa Clara to protect insured deposits.