Silicon Valley Bank seized by FDIC as depositors pull cash
New York, Mar 10: The Federal Deposit Insurance Corporation seized the assets of Silicon Valley Bank on Friday, marking the largest bank failure since Washington Mutual during the height of the 2008 financial crisis.
The bank failed after depositors mostly technology workers and venture capital-backed companies began withdrawing their money creating a run on the bank.
Silicon Valley was heavily exposed to tech industry and there is little chance of contagion in the banking sector as there was in the months leading up to the Great Recession more than a decade ago. Major banks have sufficient capital to avoid a similar situation.
The FDIC ordered the closure of Silicon Valley Bank and immediately took position of all deposits at the bank Friday. The bank had USD 209 billion in assets and USD 175.4 billion in deposits as the time of failure, the FDIC said in a statement. It was unclear how much of deposits was above the USD 250,000 insurance limit at the moment.
Notably, the FDIC did not announce a buyer of Silicon Valley's assets, which is typically when there's an orderly wind down of a bank. The FDIC also seized the bank's assets in the middle of the business day, a sign of how dire the situation had become.
The financial health of Silicon Valley Bank was increasingly in question this week after the bank announced plans to raise up to USD1.75 billion in order to strengthen its capital position amid concerns about higher interest rates and the economy.
Shares of SVB Financial Group, the parent company of Silicon Valley Bank, had plummeted nearly 70 per cent before trading was halted before the opening bell on the Nasdaq.
CNBC reported that attempts to raise capital failed and the bank was now looking to sell itself.
Silicon Valley bank was not a small bank, it's the 16th largest bank in the country, holding USD 210 billion in assets. It acts as a major financial conduit for venture capital-backed companies, which have been hit hard in the past 18 months as the Federal Reserve has raised interest rates and made riskier tech assets less attractive to investors.
Venture capital-backed companies were being reportedly advised to pull at least two months' worth of "burn" cash out of Silicon Valley Bank to cover their expenses. Typically VC-backed companies are not profitable and how quickly they use the cash they need to run their businesses their so-called "burn rate" is a typically important metric for investors.
Diversified banks like Bank of America and JPMorgan pulled out of an early slump due to data released Friday by the Labor Department, but regional banks, particularly those with heavy exposure to the tech industry, were in decline.
Yet it has been a bruising week. Shares of major banks are down this week between 7 per cent and 12 per cent.
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T'gana RTC strike: Talks between govt, employees successful
Hyderabad (PTI): Talks between employees of Telangana State Road Transport Corporation (RTC) who were on strike and the state government concluded successfully on Friday as the government agreed to the key demands of the workmen.
Following a day-long marathon of talks between the leaders of the employees' Joint Action Committee (JAC) and the cabinet sub-committee, the government announced after midnight that it acceded to the demands, including a merger of RTC with the government, 11 per cent pay revision and elections to the employees' unions.
A committee comprising officials and employee leaders would be appointed over the merger of RTC with the government, it said.
The RTC management has also agreed to address the remaining issues as well, an official release said.
The employees would call off their strike and the RTC buses would hit the roads shortly, it said.
The employees had been on an indefinite strike since April 22 over a series of demands, including the merger of RTC with the government.
Earlier in the day, a driver of the RTC, who attempted suicide on April 23 during the strike, died at a hospital here in the early hours of Friday.
Shankar Goud, a 55-year-old driver, set himself ablaze by pouring petrol at Narsampet in Warangal district when the employees were staging a protest on Thursday in support of their demands.
Goud suffered serious burns, was initially admitted to a state-run hospital in Warangal, and later shifted to a super-speciality hospital in Hyderabad for advanced treatment.
"He succumbed (to injuries) at about 1.30 am on Friday," a senior official said.
The driver’s body was taken to his relative’s village, Muttojipet in Warangal district, for funeral rites.
Tension prevailed in Muttojipet as his family members and RTC employees attempted to take the body to the Narsampet bus station, where he worked, to enable his colleagues to pay their last respects. However, police did not permit this, citing law-and-order concerns.
This led to a deadlock before the funeral could proceed.
Union Minister Bandi Sanjay Kumar criticised the Telangana government for not allowing the body to be taken to the Narsampet bus station.
Kumar, Minister of State (Home), visited Muttojipet village in Warangal district, where the funeral was held, and paid homage to Goud.
“They (family members) want to take the body to the bus depot for five minutes. Is the RTC bus depot in Pakistan or Bangladesh? They are emotionally attached to taking the body there. The government is hurting sentiments and creating fear among RTC employees,” Kumar told reporters.
He also expressed anger at the police for not allowing the body to be taken to the bus station and staged a protest, according to a release from his office.
RTC employees and BJP workers attempted to take the mortal remains in an ambulance to Narsampet, but were stopped by the police.
Later, after discussions with the police, the family members and RTC employees agreed to conduct the funeral in the village.
Sanjay Kumar, stating he would abide by the family’s decision, left the village after the funeral was conducted there.
Transport Minister Ponnam Prabhakar said an ex gratia of Rs 10 lakh, a house, and a government job would be provided to the kin of Goud.
Chief Minister A Revanth Reddy expressed shock over the employee’s death and conveyed deep condolences to the grieving family, according to the release.
The RTC employees’ JAC had earlier announced an agitation programme from April 24 to 29, including silent marches and submission of memorandums to MLAs and other leaders.
