The collapse of Silicon Valley Bank and what we know about 2nd biggest failed US lender

The Federal Deposit Insurance Corporation seized the assets of Silicon Valley Bank on Friday, marking the largest bank failure since Washington Mutual during the height of the 2008 financial crisis. The bank failed after depositors - mostly technology workers and venture capital-backed companies - began withdrawing their money creating a run on the bank.

Silicon Valley was heavily exposed to tech industry and there is little chance of contagion in the banking sector as there was in the months leading up to the Great Recession more than a decade ago. Major banks have sufficient capital to avoid a similar situation.

The FDIC ordered the closure of Silicon Valley Bank and immediately took position of all deposits at the bank Friday. The bank had USD 209 billion in assets and USD 175.4 billion in deposits as the time of failure, the FDIC said in a statement. It was unclear how much of deposits was above the USD 250,000 insurance limit at the moment.

Notably, the FDIC did not announce a buyer of Silicon Valley's assets, which is typically when there's an orderly wind down of a bank. The FDIC also seized the bank's assets in the middle of the business day, a sign of how dire the situation had become.

The financial health of Silicon Valley Bank was increasingly in question this week after the bank announced plans to raise up to USD1.75 billion in order to strengthen its capital position amid concerns about higher interest rates and the economy.

Shares of SVB Financial Group, the parent company of Silicon Valley Bank, had plummeted nearly 70 per cent before trading was halted before the opening bell on the Nasdaq.

CNBC reported that attempts to raise capital failed and the bank was now looking to sell itself.

Silicon Valley bank was not a small bank, it's the 16th largest bank in the country, holding USD 210 billion in assets. It acts as a major financial conduit for venture capital-backed companies, which have been hit hard in the past 18 months as the Federal Reserve has raised interest rates and made riskier tech assets less attractive to investors.

Venture capital-backed companies were being reportedly advised to pull at least two months' worth of "burn" cash out of Silicon Valley Bank to cover their expenses. Typically VC-backed companies are not profitable and how quickly they use the cash they need to run their businesses - their so-called "burn rate" - is a typically important metric for investors.

Diversified banks like Bank of America and JPMorgan pulled out of an early slump due to data released Friday by the Labor Department, but regional banks, particularly those with heavy exposure to the tech industry, were in decline.

Yet it has been a bruising week. Shares of major banks are down this week between 7 per cent and 12 per cent.

About Silicon Valley Bank

Silicon Valley Bank (SVB) is a commercial bank that provides financial services to technology and life science companies, venture capitalists, and private equity firms. It was founded in 1983 and is headquartered in Santa Clara, California. SVB offers a wide range of services including corporate banking, venture capital, private banking, investment management, and international banking. It is known for its expertise in the technology and life science sectors and has helped many startups and emerging companies grow through its financing and advisory services.

In addition to its headquarters in California, SVB has offices in other technology and innovation hubs around the world, including the United Kingdom, China, and Israel. It is a publicly traded company listed on the NASDAQ stock exchange under the ticker symbol SIVB.