New Delhi: Silicon Valley Bank, one of America’s largest & top league banks collapsed on Friday, thereby setting a sense of frenzy in the financial markets globally. Stock markets across the globe saw its impact. Banking stocks were among the hardest hit globally.
Silicon Valley Bank’s clients include some very high-profile technology start-ups, who have taken huge loans from the Bank. It’s sudden failure will also sound a death knell for them.
Silicon Valley Bank was recently categorized among America’s best banks.
The downfall of US banking giant has stirred a major storm especially in the technology sector. Notably, this is biggest retail banking failure since the 2008 financial meltdown.
The Silicon Valley Bank was closed down by the California Banking regulators on Friday. The US regulators have now taken control of the bank & also its deposits. The sudden collapse of Silicon Valley bank means that billions of dollars belonging to companies, investors will remain stranded in the cash-strapped bank.
How the bank turned bankrupt?
The failure of Silicon Valley Bank (SVB) comes as a major setback for Indian IT & tech firms also. A lot many Indian start-ups, specifically in the Saas (software as a service) are said to be connected to the bank, in some way.
SVB’s investments in many high-flying start-ups earned it huge reward and it chose to invest that big fortune & assets in US bonds, in hope of good returns. However, that proved to be its big fault. When the US Federal Reserve started raising its interest rates, the bond value went down.
SVB failed to rein in the damage on time, as a result of which its assets & fortunes took a hit, beyond repair.
