The California Department of Financial Protection and Innovation said it has taken possession of Silicon Valley Bank, citing inadequate liquidity and insolvency.
Silicon Valley Bank became the biggest US lender to fail in more than a decade after a tumultuous week that saw an unsuccessful attempt to raise capital andRegulators stepped in and seized it Friday in a stunning downfall for a lender that had quadrupled in size over the past five years and was valued at more than $US40 billion as recently as last year.
Banks were already suffering from the jump in rates that eroded the value of their portfolios, and meanwhile customers in the technology and crypto startup worlds were yanking cash amid a slump in their businesses. In SVB’s case, the turmoil fed on itself as customers worried about its health rushed to withdraw money.“Bank runs are a lot about psychology. And at this point, it’s very rational to be nervous,” said Saule Omarova, a law professor at Cornell University.
Problems mounted for SVB after Peter Thiel’s Founders Fund and other high-profile venture capital firms advised their portfolio companies to pull money from the bank. The calls followed parent company SVB Financial Group announcing that it would try to raise more than $US2 billion after a significant loss on its portfolio.
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