Silicon Valley Bank: Why It Collapsed and Is It the Beginning of a Banking Crisis? || SVB Update news Today || Silicon Valley Bank Crisis News in English

 

 ##Until a few days ago Silicon Valley Bank was the 16th largest bank in the United States, valued at over $200 billion.

 Silicon Valley Bank (SVB), four decades ago, was well known and trusted for its technical expertise and sound decision making.

 But the current condition of the bank is very deplorable.

 

  ## What happened to Silicon Valley Bank (SVB)?

 As the popular bank for the technology sector, SVB's services were in demand during the boom.

  The year was early 2020, when the bank quickly ushered in a golden period for startups and established tech companies after the business hit during Covid-19, as consumers spent heavily on gadgets and digital services.

 Many large companies used SVB to hold cash that they used for payroll and other business expenses.

 As a result, the deposit flow to the bank increases. The bank invests a large portion of its deposits in various sectors, which other banks usually do.

 But the biggest risk investment was the heavy investment in US government bonds, which are considered by many to be safe havens.

  But bond interest rates always have an inverse relationship; When rates rise, bond prices fall. So when the Federal Reserve began raising rates rapidly to combat inflation, SVB's portfolio of bonds began to lose significant value.

If SVB is able to hold those bonds for several years until they mature, it can recoup its capital. However, as economic conditions worsened last year, with technology companies particularly affected, many bank customers wanted to withdraw their deposits.

  SVB did not have enough cash on hand, and so it began selling some of its bonds at steep losses, scaring away investors and customers.

 Money crisis started in the bank. Currently going bankrupt.

  It only took 48 hours between the time it disclosed that it had sold assets and its collapse.

  Is this the beginning of all banking crises?

  A new concern is expressed by the quick response of the US government in guaranteeing all deposits of bank customers.

  Financial futures, which allow investors to speculate on future price movements, rallied for the US technology sector in response to the guarantees.

  There was concern that if this guarantee was not implemented, SVB account holders would not be able to pay the employees.

  "In terms of sustainability, they avoid supply chain consequences," Moshirian said.

Governments and regulatory bodies around the world, including in the UK and Australia, are examining SVB exposure in their corporate and banking sectors.

  The longer-term question is whether SVB's vulnerability to rising interest rates is paralleled by excess exposure to declining bond prices in other banks.

  According to Moshirian, the banking system is going to be reinvented, noting that people initially felt that there was a sub-prime mortgage crisis. Which led to the global financial crisis.

 To address the risk, the Federal Reserve unveiled a new program that allows banks to borrow funds backed by government securities to meet the needs of deposit customers.

  SVB caters to Silicon Valley, backing startups and other tech companies that may shy away from traditional banks.

  In recent months, the sector has been laying off workers as economic conditions worsen. At a time when they need financial support, one of its biggest supporters has collapsed. So be careful.

 ##Nowadays economist advice to people is that every customer should deposit money in a savings account with government security. Keep the money by judging the current situation of the bank where you are depositing money, their security. If possible, open a savings account in another bank. Remember nothing is guaranteed. On review Indians should keep as much money in different banks as per government security money.