CEO's Corner®-By K.L.P Entertainment™-"March 10th Edition"

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The assets of the bank were taken over by the Federal Deposit Insurance Corporation on Friday. The failure sparked worries that other institutions would experience difficulties as well. One of the most well-known financiers for technology start-ups collapsed on Friday as a result of poor choices and anxious clients, necessitating intervention from the federal government. The Santa Clara, California-based Silicon Valley Bank, which has been around for 40 years, will be taken over, according to the Federal Deposit Insurance Corporation. The bank's failure ranks

second in American history and is the biggest since the 2008 financial crisis. The action gave the regulator jurisdiction over consumer deposits worth close to $175 billion. Despite the quick demise of the 16th-largest bank in the country brought to mind the A decade and a half ago, when there was a worldwide financial panic, there were no immediate worries about the banking sector or the global economy being completely destroyed.

The demise of Silicon Valley Bank happened two days after it made hasty decisions to deal with withdrawal requests, shocking Wall Street and depositors with a sharp decrease in the value of its investment holdings, sending its shares tumbling. According to a person with knowledge of the negotiations, the bank, which will have about $212 billion in assets at the end of 2022, had been seeking a buyer with the help of financial consultants up until Friday morning. Silicon Valley Bank's problems are specific to it, but a financial contagion appeared to spread over some of the banking industry, which led Treasury Secretary Janet Investors were publicly reassured by Yellen that the banking system was solid.

Stocks of Silicon Valley Bank competitors First Republic, Signature Bank, and Western Alliance, many of which serve start-up clients and have comparable investment portfolios, were sold off by investors.

At least five banks' shares saw at least five trading halts during the day as a result of their sharp falls exceeding stock exchange volatility limitations.

In contrast, some of the biggest institutions in the country seemed better protected from the consequences. Shares of JPMorgan, Wells Fargo, and Citigroup were all basically flat on Friday following a decline on

Thursday. This is so because the largest banks function in a quite different environment. They have significantly larger deposit bases than banks like Silicon Valley, and their capital requirements are stricter. which do not draw a significant amount of retail shoppers. The big banks have mostly avoided risky assets like cryptocurrency in an effort to avoid becoming overly specialized in one line of business, according to regulators. Sheila Bair, a former chair of the F.D.I.C., stated, "I don't think that this is a concern for the large banks - that's the good news, they're diversified. The biggest banks should be expected to have a lot of liquidity, Ms. Bair continued, because they are mandated to retain cash equivalents even against the safest kind of government debt. According to a statement from the Treasury Department, Ms. Yellen spoke with banking authorities on Friday about the problems involving Silicon Valley Bank. That had been effective for a while. a bank’s Deposits increased from $49 billion in 2018 to $102 billion by the end of 2020. It had $189.2 billion in its coffers a year later, in 2021, as start-ups and tech firms made astronomical profits during the pandemic. But, it made no preparations for the prospect that interest rates would rise very

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those holdings lost appeal because more recent government bonds offered better interest rates.

That might not have mattered if the bank's customers hadn't requested a refund. But because interest rates increased while the flow of startup investment halted, The customers of the bank started to withdraw more of their funds.

Silicon Valley Bank sold some of its interests in order to satisfy such redemption requests. The bank revealed unexpectedly on Wednesday that it had lost about $2 billion when it was all but forced to liquidate some of its holdings.

Ms. Bair referred to the actor who portrayed a banker attempting to prevent a bank run in the movie "It's a Wonderful Life" as saying, "It's the classic Jimmy Stewart problem." "The bank will have to start selling some of its assets to give money back to depositors if everyone starts withdrawing money at once."

Investor concerns about several of the regional banks were sparked by these issues. Signature Bank, like Silicon Valley Bank Bank is another

First Republic Bank, a San Franciscobased lender that specializes in wealth management and private banking services for high net worth clientele in the tech sector, has issued a warning that rising interest rates are impeding its capacity to turn a profit. Western Alliance Bank, a competitor in the wealth management sector with a Phoenix location, is subject to comparable challenges.

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According to a person familiar with the situation, Maxine Waters, a Democrat from California and the ranking member of the House Financial Services Committee, hosted a bipartisan briefing for members of Congress that included representatives from the Federal Reserve and the F.D.I.C.

Silicon Although Valley Bank's problems have been building for more than a year, they suddenly worsened this week. The 1983-founded bank

Notwithstanding the bank's claims to be a "partner for the innovation economy," this situation was caused by some definite retro choices. Silicon Valley Bank did what all banks do when they are flush with cash from high-flying start-ups that have received a lot of money from venture capitalists: it kept a portion of the deposits on hand and invested the rest in the hopes of making a return. Specifically, the bank invested a significant portion of customer deposits in long-dated Treasury bonds and mortgage bonds that offered moderate, consistent returns. There were low interest rates. A other bank, Silvergate, announced on Wednesday that it was closing its doors and liquidating after suffering significant losses as a result of its exposure to the bitcoin market. A First Republic spokeswoman shared a document the bank made to the Securities and Exchange Commission on Friday that stated that its deposit base was "strong and very-well diversified" and that its "liquidity position remains extremely robust" in response to a request for comment.

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strong, according to the statement. Asset quality is still very good. No comments were made by Signature or Silicon Valley Bank representatives. Federal Reserve and F.D.I.C. representatives declined to comment. On Friday, some banking experts made the observation that portions of the DoddFrank financial regulatory

package, which was put in place following the 2008 financial crisis, may have helped a bank the size of Silicon Valley Bank better manage its interest rate risks.

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A package that lowered regulatory oversight for many regional banks was signed into law by Mr. Trump in 2018. Greg Becker, CEO of Silicon Valley Bank, was a prominent proponent of the reform that altered the amount of cash that banks had to retain on their balance sheets to protect against shocks and removed the requirement that banks with assets under $250 billion subject to stress testing by the Fed.

On Friday, some banking experts made the observation that portions of the Dodd-Frank financial regulatory package, which was put in place following the 2008 financial crisis, may have helped a bank the size of Silicon Valley Bank better manage its interest rate risks.

A package that lowered regulatory oversight for many regional banks was signed into law by Mr. Trump in 2018. Greg Becker, CEO of Silicon Valley Bank, was a prominent proponent of the reform that altered the amount of cash that banks had to retain on their balance sheets to protect against shocks and removed the requirement that banks with assets under $250 billion subject to stress testing by the Fed. The assets of Silicon Valley Bank totaled $45 billion at the end of 2016. that cheques drawn on the old bank would continue to clear and that the new organization will be operational by Monday. There is no certainty that depositors with greater balances in their accounts will receive a full

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recovered while Silicon Valley Bank is under the FDIC's receivership, though they might not receive a full refund.

Like Silicon Valley Bank, the California bank IndyMac did not find an immediate buyer when it failed in July 2008. When the F.D.I.C. Large depositors eventually only received 50% of their uninsured cash

back due to IndyMac being in receivership until March 2009. Account holders received full reimbursement when JPMorgan Chase acquired Washington Mutual.

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