Californian Silicon Valley Bank went bankrupt in the US, Associated Press reports. The agency states that the bankruptcy of such a large bank was the first after the 2008 financial crisis.
The 16th largest US bank found itself in this situation after depositors began withdrawing their funds amid concerns about the situation at the lending institution.
Californian Silicon Valley Bank has been primarily involved in lending to the tech start-up industry. This is the second-largest bank failure since Washington Mutual collapsed in 2008.
Earlier this week, SVB Financial Group, the parent company of Silicon Valley Bank, announced the emergency sale of US Treasuries and mortgage bonds totaling $21 billion from the bank’s portfolio due to a larger-than-expected outflow of customer funds from deposits. SVB lost $1.8 billion as a result of the emergency sale of securities.
Silicon Valley Bank’s problems are partly related to the aggressive tightening of the Fed’s monetary policy, writes The Wall Street Journal.
An increase in interest rates leads to a decrease in the value of bonds in banks’ portfolios, but unrealized losses do not necessarily become a problem for financial companies. In the case of SVB, the difficulties arose because the bank had to sell these assets at a loss to cover the outflow of funds from deposits.