Silicon Valley Bank disaster: The dad or mum of Silicon Valley Bank, seized final week by the US, is submitting for Chapter 11 bankruptcy safety.
SVB Financial Group, together with its CEO and its chief monetary officer, have been focused this week in a category motion lawsuit that claims the corporate did not disclose the dangers that future rate of interest will increase would have on its enterprise.
SVB Financial Group is now not affiliated with Silicon Valley Bank after its seizure by the Federal Deposit Insurance Corp.
The financial institution’s successor, Silicon Valley Bridge Bank, is being run beneath the jurisdiction of the FDIC and isn’t included within the Chapter 11 submitting.
SVB Financial Group believes it has roughly USD 2.2 billion of liquidity.
What led to SVM’s bankruptcy?
It needs to be famous right here that Silicon Valley Bank was badly affected by the Federal Reserve’s aggressive plan to boost rates of interest to fight inflation together with the decline in expertise shares over the previous 12 months. The financial institution had purchased billions of {dollars} price of bonds over time utilizing buyer deposits. This is what banks often do.
These investments are typically protected, however as rates of interest rise, the worth of those investments has fallen as a result of they have been getting much less curiosity as in comparison with at the moment’s greater curiosity. Normally this isn’t an issue, as banks make investments for the long run. But issues can change after they need to promote in an emergency. SVB’s shoppers have been largely startups and different tech-focused firms, which have been struggling for money over the previous 12 months.
(With inputs from AP)
