The sudden collapse of Silicon Valley Bank (SVB), which was shut down by US authorities on Friday, sent a wave of panic across the banking sector as markets questioned the consequences of the biggest US bank failure since the 2008 financial crisis. for AFP.

Silicon Valley Bank (SVB)Photo: NOAH BERGER / AFP / Profimedia

The bank has been unable to cope with massive withdrawals from its customers, mostly technology companies, and its latest attempts to raise new money have failed.

Therefore, the US authorities officially took over the bank and entrusted its management to the US Deposit Insurance Agency (FDIC).

US Treasury Secretary Janet Yellen summoned several financial regulators to discuss the situation on Friday, reminding them that she has “full confidence” in their ability to take appropriate action” and saying the banking sector remains “resilient”.

Nervous customers

Little-known to the general public, SVB specialized in financing startups and became the 16th largest US bank by assets, with assets of $209 billion and approximately $175.4 billion in deposits at the end of 2022.

Its demise is not only the largest bank failure since Washington Mutual in 2008, but also the second largest failure of a US retail bank.

Outside the bank’s headquarters in Santa Clara on Friday, several nervous customers wondered how they would be able to access their funds, some trying to guess what was going on behind the closed glass doors. On the door, a document from the FDIC said they could withdraw up to $250,000 starting Monday.

The markets panicked on Thursday after SVB said it was scrambling to quickly raise capital to deal with massive withdrawals from its customers, having lost $1.8 billion from selling financial securities.

The announcement surprised investors and reignited fears about the soundness of the entire banking sector, especially given that the rapid rise in interest rates has reduced the value of the bonds in their portfolios and raised the rate at which they borrow.

The four largest US banks lost $52 billion in the stock market on Thursday, and Asian and then European banks have struggled since.