But they pay out in full only when they're held to maturity otherwise, long-term bonds risk losing value if interest rates rise. government, are generally considered to be safe, modest investments. ![]() Those bonds, which are backed by the U.S. In 2021, when interest rates were at record lows, the cash-rich SVB invested billions of dollars into long-term U.S. The bank's customers filled its coffers with deposits totaling well over $100 billion. Silicon Valley Bank's business had boomed during the pandemic as tech companies flourished. (It turns out that this concentration in the tech sector was key to its demise.) But it remained little known outside of tech circles - until this past week. "They are able to provide all the products and services any of these sophisticated technology companies, as well as these sophisticated venture capital and private equity funds, would need."Īmong its clients were tech and tech-adjacent companies like Roku, Roblox and Vox Media. "They really developed a niche that was the envy of the banking space," said Jared Shaw, a senior analyst at Wells Fargo. It had become a major player in the tech sector, in which it successfully competed with bigger-name banks. Here's what to know.Īlthough it wasn't a megabank like Goldman Sachs or JPMorgan Chase, Silicon Valley Bank had punched above its weight during its 40-year history.īased in Santa Clara, Calif., SVB's clients included venture capital firms, startups and wealthy tech workers. Shares of small, regional lenders have been hammered the bond market has swung wildly and now, the pressure is on the Federal Reserve to dial back its interest rate increases even as inflation persists. The collapse has sent shockwaves across the financial industry. Regulators announced the takeovers after what was effectively a run on Silicon Valley Bank late last week when depositors rushed to withdraw tens of billions of dollars worth of deposits. Now, both banks are both under the control of the Federal Deposit Insurance Corporation, or the FDIC. Then, on Sunday, regulators grew concerned about the financial health of New York's Signature Bank, largely because of its big exposure to the volatile crypto market. bank to fail since the 2008 global financial crisis. Silicon Valley Bank, which catered to many of the world's most powerful tech investors, collapsed on Friday and was taken over by federal regulators, becoming the largest U.S.
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