"Silicon Valley Bank Collapse: Regulators Take Over as Bank Crashes Due to High-Interest Rates and Client Withdrawals"

Silicon Valley Bank, a major lender to technology companies, has collapsed, making it the largest bank failure since the 2008 financial crisis. The move put almost $175 billion in customer deposits under the control of the Federal Deposit Insurance Corp. Regulators took over the bank after it tried to convince clients not to withdraw their money due to concerns about low cash reserves. The FDIC created a new bank, the National Bank of Santa Clara, to hold the deposits and other assets of the failed bank. Silicon Valley Bank had bought a significant amount of bonds to earn a return, which had worked well until interest rates began to rise and startup funding decreased. This put pressure on many of the bank’s clients, who then withdrew their money. To pay those requests, Silicon Valley Bank was forced to sell off some of its investments at a time when their value had declined, resulting in a loss of almost $2 billion. Although Silicon Valley Bank is smaller than the nation’s largest banks, the fear is that bank runs could happen if customers panic and start withdrawing their deposits. This could also affect other banks. Shares of some banks, such as First Republic Bank and Signature Bank, fell by more than 20% on Friday. However, shares of some of the largest banks, including JPMorgan, and Wells Fargo, rose on Friday. As the startup ecosystem tries to make sense of Silicon Valley Bank’s collapse, some entrepreneurs are turning to loans to make payroll. The bank had provided services to almost half of venture capital-backed technology and life-science companies and over 2,500 venture capital firms, including Lightspeed, Bain Capital, and Insight Partners.