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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Hemant Soren to take oath as 14th CM of Jharkhand on Thursday
Ranchi (PTI): Hemant Soren is set to take oath as the 14th chief minister of Jharkhand in a grand ceremony here on Thursday, which will be attended by several top political leaders, including AICC president Mallikarjun Kharge, Leader of Opposition Rahul Gandhi and West Bengal Chief Minister Mamata Banerjee.
Governor Santosh Kumar Gangwar will administer the oath of office and secrecy to Soren at 4 pm.
This will be the 49-year-old JMM leader's fourth stint as chief minister.
Soren retained the Barhait seat, defeating BJP's Gamliyel Hembrom by a margin of 39,791 votes in the recent assembly polls. The JMM-led alliance stormed to victory, securing 56 seats in the 81-member assembly, while the BJP-led NDA managed 24 seats.
Posters for the event can be seen across the city, while security has been strengthened and traffic regulations put in place.
Schools in Ranchi city are shut on Thursday in view of the swearing in of the Hemant Soren government.
Jharkhand in-charge and Congress general secretary Ghulam Ahmad Mir said Soren is likely to take oath alone, and expansion of the cabinet will be held after a vote of confidence in the assembly.
Other senior political leaders likely to be in attendance are NCP chief Sharad Pawar, Meghalaya CM Conrad Sangma, Punjab CM Bhagwant Mann and Himachal Pradesh CM Sukhvinder Singh Sukhu, a JMM leader said.
CPI(ML)L general secretary Dipankar Bhattacharya, AAP leader Arvind Kejriwal, Shiv Sena (UBT) leader Uddhav Thackeray, Samajwadi Party chief Akhilesh Yadav, PDP leader Mehbooba Mufti and Bihar’s Leader of Opposition Tejashwi Yadav are also likely to attend the oath-taking ceremony.
"It’s heartening to have such esteemed leaders join us for this important occasion," said Soren, who along with senior officials paid a visit to the Morabadi ground on Wednesday evening to take stock of the arrangements.
