The Silicon Valley Bank (SVB) collapse is the second largest bank failure in US history. It is only dwarfed by the collapse of Washing Mutual Bank in September 2008. SVB had assets of $209 Billion and Deposits of $175 Billion.
On the 9th of March, $42 Billion in attempted withdrawals were made, thus a bank run. In short, this bank run led sell bonds below market value since interest rates had recently gone up. The estimated loss was around $16 Billion on these Treasury and mortgage-backed bonds.
Possible additional causes of this collapse could be bad loans to the technology sector. SVB was in the business of venture debt. It would be interesting to see if this was one of the causes. The end result that a lot of hi-tech firms stand to loose any deposits over the FDIC amount of $250,000.
This is already shaping up a posibile political issue with Republican hopeful Haley stating that the federal government should not bail out this bank. Let’s take a wait and see approach on this one.
Our opinion is that this could affect other potential banks investing in the technology space. However, we do not see this bank as causing systemic risk. One outcome is that firms could leave regional banks and shift deposits to the larger better capitalized banks. This could expose some regional banks.