The collapse of Silicon Valley Bank (SVB) had a significant impact not only on the United States, but also on businesses and countries around the world. As one of the largest and most successful banks in the world, SVB has played a vital role in providing financial services to many of the most innovative and high increase companies in the technology sector.
The SVB collapsed on March 10, 2023 and is considered the biggest bank failure since the financial crisis. crisis. Founded in 1983, SVB specialized in banking for tech startups. He funded nearly half venture capital-backed US technology and healthcare companies. SVB was among the top 20 US commercial banks, with $209 billion in total assets at the end of last year.
One of the causes of this collapse was the Federal Reserve when it started raising interest rates a year ago to control inflation. The Fed took aggressive action and tech stocks, which had benefited SVB, lost momentum due to higher borrowing costs. Long-term bonds that the SVB and other banks bought when interest rates were extremely low, close to zero, also lost value due to rising interest rates. Current 10-year cash flow yield is around 3.9%, so SVB’s $21 billion bond portfolio was yielding an average of 1.79%. At the same time, venture capital began to dry up, startups had to take money from SVB. As a result, while the clientele rate withdrawals increased, the bank was sitting on a mountain of unrealized losses.
One of the most immediate effects of SVB’s collapse is the disruption of the financial services the bank provides to its clients. Many of the world’s largest technology companies have relied on SVB for services such as lending, cash management and investment banking. Companies are now struggling to get a replacement that could provide comparable services, especially in the short term.
SVB’s collapse has significant implications for the whole technology industry. The bank plays a vital role in financing many of the most innovative and high increase companies in the sector. With the failure of the bank, it is much more difficult for these companies to obtain the financing that they need continue to innovate and grow.
In addition to the impact on the tech industry, the collapse of SVB has wider implications for the world. economy. As a major player in the banking sector, SVB maintains relationships with many banks and financial institutions around the world. world. The collapse of SVB had several geopolitics repercussions. The bank has relationships with many companies and governments around the world, particularly in the field of technology sector. The failure of this bank led to a loss of confidence in the ability of the United States to maintain its leading position in the technology and finance. This loss of confidence raises questions about the ability of the United States to maintain its global influence.
Beyond the impact on the United States, the collapse of SVB has reached other countries around the world. Many of the world’s largest tech companies are headquartered out of the United States, and these companies relied on SVB for essential financial services. It is now much more difficult for these businesses to obtain financing and access to financial services.
In conclusion, the collapse of Silicon Valley Bank is causing significant complications for businesses and countries around the world. The disruption to financial services, the impact on the tech industry, and the wider geopolitical and economic implications are being felt around the world. The risks associated with its concentration in the technology sector, the regulatory environment, the competitive landscape and external events cannot be ignored. Businesses and governments around the world should monitor the situation closely and prepare for how they will overcome this collapse.