Shares of SVB Financial Group (SIVB (opens in new tab)) were halted earlier after the financial firm’s subsidiary, Silicon Valley Bank, was closed today by the California Department of Financial Protection and Innovation.
The regulatory agency named the Federal Deposit Insurance Corporation (FDIC) as the receiver of the regional bank, which services many of the world’s largest technology companies. This helps protect insured depositors, who “will have full access to their insured deposits no later than Monday morning, March 13, 2023,” according to a press release (opens in new tab).
The failure of Silicon Valley Bank – which marks the biggest bank to fail since the 2008 financial crisis – comes just days after parent company SVB Financial Group sparked debt concerns when it sold Treasuries and other assets for a nearly $2 billion loss and announced a massive stock offering in order to raise capital. This sent shares of SIVB stock tumbling more than 60% on Thursday. The financial stock was set for another drastic drop in premarket trading before it was halted.
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What happened at Silicon Valley Bank?”The story began when insiders were advising clients to pull their money out, and as is often the case when financial institutions start to falter, people shot first and asked questions later. The stock collapsed from above $270 to below $165 Wednesday night and pre-market today hit $39 and has stopped trading on pending news,” says Louis Navellier, chairman and founder of Navellier & Associates. “Why should this matter? Because fears are high that problems there may spread to other regional banks.”
As for the impact of Silicon Valley Bank’s failure on large banks, CFRA Research analyst Kenneth Leon does not see this as a fundamental or liquidity risk. “Large bank deposits have a diversified customer base (especially low-cost consumer deposits) that is sticky and not likely to exit these banks. SIVB had concentration risk to deposits in the technology and venture capital industry,” Leon says.
Still, the chaos caused by Silicon Valley Bank – which has taken the spotlight off the February jobs report – has sparked a broad selloff across Wall Street. Not surprisingly, bank stocks are some of the biggest losers today, with names like Silvergate Capital (SI (opens in new tab)) and Signature Bank (SBNY (opens in new tab)) racking up sizable losses in Friday’s trading.