Silicon Valley Bank, a state-chartered commercial bank and well known in the tech community recently experienced a global collapse on March 10, after the United State’s Federal Reserves decided to increase the interest rate. This decision majorly dispelled numerous investors from the financial institution which had built a strong relationship with global technology startups and venture capital. In fact, reports indicates that the Silicon Valley Bank collapse has now been regarded as the biggest bank failure in the United States of America since 2008.
The incessant downturn in the global technology stocks over the last year and the insistent plan of the Federal Reserves to raise the interest rate in a bid to curb inflation significantly affected the operations of Silicon Valley Bank. Like every typical banks, SVB reportedly bought bonds worth billions of US Dollars over the years with its customers’ deposits. Whilst these investments were definitely safe, the value reduced significantly as a result of the low interest rate that they paid. Also, this is mostly not a big problem for banks as they get to hold on to these bonds for a long period except the need to sell on emergencies arise.
SVB had to sell its assets to meet the withdrawal demands of customers.
Need for cash among SVB’s customers, which were mostly startups and tech-oriented firms, continued to grow significantly over the last year and as venture capital funding started to dwindle, it become immensely cumbersome for firms to acquire more rounds of funding for unprofitable ventures and thus, had to tap into their existing funds which were deposited at the Silicon Valley Bank and as customers commenced withdrawing their money, the bank had to sell its assets so as to meet the demands of the customers.
With SVB being a bank used by wealthy and business entities, the institution was wary of any bank failure due to their deposit being over $250,000. As a result of this situation, SVB had to sell its bonds. The bank made efforts toward more capital but they failed massively. However, whilst many experts expect that this situation does not exceed beyond the broad banking sector, there have been predictions of instability such as the dip in the crypto market. Experts have also noted that the United States’ tech industry might experience a ripple effect, if the money deposited at SVB is being delayed.
The anxiety of Nigerian tech startups have further aggravated.
This situation has however not affected the US tech firms alone. The anxiety of Nigerian tech startups has further aggravated, with the United States Treasury Secretary, Janet Yellen, noting that the government has no intention to bail out the bank. With HSBC, one of the US’ biggest financial institution acquiring SVB UK, tech firms in Nigeria, which have proved to be the biggest of Africa’s tech startups industry, are being immensely distressed by this situation.
Whilst reports have indicated that the impact on Nigeria’s project capital initiative would be less significant, its impact on the local startup sector is still unclear. With over 140 fintech startups according to the 2021 data, reports suggest that fintech startups in Nigeria registered about $507 million in funding value between January and August 2022. Adedeji Olowe, the CEO of Lendsqr, a fintech firm, whilst speaking on the situation, explained that some startups might have their funds trapped in the bank but in reality, their funds would not disappear.
The crisis not the same as the finance crisis that hit America in 2008.
Yellen, in an interview with CBS, also detailed the next steps of the government, laying immense emphasis on the fact that this situation was not the same as the financial crisis that hit the country 15 years ago (USA). According to her, the government was only concerned about the depositors and was working on meeting their needs. She further assured everyone that the collapse of Silicon Valley Bank would cause no domino effect, stating that the banking system in America was safe and efficiently capitalized.
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Silicon Valley Bank collapse raises anxiety. – Downturn of global technology stocks & increased interest rate affected SVB. – Express your point of view.
There is already a financial crises that is going on around the world. The Sillicon Valley bank that collapsed shows that any bank can collapse if the interest rates are too much for them.
It is a pity the silicon valley bank had to share part of the burden economic downturn caused. As a result, it led to the collapse of the bank. The federal reserve should be considerate enough to help situations and affairs of the bank too.
Silicon Valley Bank collapse due to increase interest rate, high interest rate can affect bank and collapse if care is not taken help should be given to them to raise up again
SVB is one of the major bank used by big companies in USA, it’s quite unfortunate that they experience this downfall, my major concern is that have excess funds with them. I hope they get refunded
This is a downfall of a bank the government should try and revive the bank and help them rise and people who deposit there hope they will be refunded back
It is important for the government to have common sense and realize that this move has significantly driven away a large variety of shareholders from the country’s banking firms.
We ought to be aware that this will result in a significant issue for financial institutions given that they will be required to keep certain assets for an extended duration.
This SVB collapse will surely affect the operations of majority of startups that have funds with them.
It’s unfortunate that the bank had to liquidate its holdings to satisfy its clientele, but I have faith that their financial situation will soon improve.
I still can’t fathom why these banks are experiencing crisis in their operations. I just pity the Nigerians startup that have there funds there.
Despite the widespread belief that this crisis would not affect industries outside of banking, it has affected the crypto market and that is sad because it affected many people into crypto.
Those who have money deposited there fear for the future unless the government takes action to assist it recover.
The startup that have funds with them should be refunded at least half in the worst case scenario or else it will be very difficult for them to run their operations.
As it stands, a global financial crisis is unfolding. Like the Sillicon Valley bank, any bank can fail if they fail to maintain the balance of there interest rates.
Silicon Valley Bank collapse raises anxiety. They have improved more . The banking system can collapse if they are not doing the needful
It’s unfortunate that the Silicon Valley bank had to shoulder some of the load that the economic slump brought. It ultimately caused the bank to fail as a result.
High interest rates can impact banks and cause them to fail if precautions are not followed; this is what caused the Silicon Valley Bank to fall. If this happens again, assistance should be provided.