Silicon Valley Bank collapses in biggest US bank failure since 2008
A sudden run on deposits brought down the lender favoured by tech start-ups, triggering fears of a wider banking crisis.
Silicon Valley Bank, a mainstay of the technology and start-up world, collapsed on Friday after a sudden run on deposits, in the largest failure of an American bank since the 2008 financial crisis and a shock that sent tremors through the financial system.
The lender had grown rapidly during the tech boom, taking in a flood of deposits that it invested heavily in long-term government bonds. When interest rates rose sharply, the value of those bonds fell, and when the bank disclosed a loss and tried to raise capital, nervous customers — many of them tech companies and venture capital firms that communicated instantly with one another — rushed to pull their money out. The bank could not withstand the stampede.
US regulators seized the bank and, over the weekend, moved to guarantee that all depositors would have access to their money, an extraordinary step intended to prevent panic from spreading to other regional lenders. A second bank, Signature, was shut down shortly afterward.
The episode exposed how quickly a bank could unravel in the digital age, when word travelled instantly and deposits could be withdrawn with a few taps on a phone. It also raised questions about supervision and about the risks that had built up quietly as interest rates climbed.
Markets steadied after the government's intervention, but the failure rattled confidence and foreshadowed further strain in the banking sector in the months ahead.