Home Business The bankruptcy of Silicon Valley Bank affects companies and entities

The bankruptcy of Silicon Valley Bank affects companies and entities

The bankruptcy of Silicon Valley Bank affects companies and entities

This morning the financial sector has woken up revolutionized after the news of Silicon Valley Bank bankruptcy and the intervention in a second entity, Signature Bank. A situation that has inevitably caused alarm bells to go off at the start of a possible financial crisis.

What is Silicon Valley Bank and what has happened?

He Silicon Valley Bank (SVC) is one of the most famous American banks for the sector startups, since it focuses on financing companies in this sector that are usually associated with extra risk due to not having enough income in many cases. The entity’s situation would have begun to worsen with the pandemic, the Russian invasion of Ukraine and inflation affected the bank; a situation that affected many companies and that led the US Federal Reserve to increase interest rates to combat inflation.

However, his great fall did not begin until the past Thursday when shares fell 60% and requested aid of 2,500 million dollars to correct its balance sheet or be acquired by a larger company. Finally, the Friday their shares fell 68% and talk of a possible default began, prompting investors to withdraw $42 billion in ten hours.

Last Friday March 10 Silicon Valley Bank (SVB) advertisement his collapse due to his financial problems, this caused great nervousness in the start-up sector. For this reason, the US Federal Reserve (Fed) has taken action on the matter and has announced that the insured clients of Silicon Valley Bank (SVB) may have «access to all your money starting Monday, March 13. The taxpayer will not bear the losses associated with the resolution of Silicon Valley Bank«. While for uninsured depositors, the Federal Deposit Insurance Corporation (FDIC)has announced that “will pay an anticipated dividend within the next week. Uninsured depositors will receive a certificate of receivership for the remaining amount of their uninsured funds» and clarifies that «As the FDIC sells off Silicon Valley Bank’s assets, future dividend payments may be made to uninsured depositors«.

The closure of the bank took place that same Friday, ordered by the State of California Department of Financial Protection and Innovation, announcing the closure through an official statement. In addition, the situation has led the UK to acquire by HSBCin coordination with the government, the British subsidiary of Silicon Valley Bank: “This action was taken to stabilize SVBUK, ensuring the continuity of banking services, minimizing disruption to the UK technology sector and supporting confidence in the financial system.”the country’s central bank said in a statement.

What happened to Signature Bank?

On Sunday the United States Government announced the closure of the New York bank SignatureBankone of the most important cryptoactive banks in the United States, alleging that there would be a risk of contagion due to the situation of Silicon Valley Bank, since they had similar business models.

The Fed has launched an emergency plan backed by a guarantee of 25,000 million dollars, to assist banks with financial problems that request help. So the country is preparing to solve the problems that arise in the future.

Companies, countries and institutions have been affected

This is the biggest bank collapse since the 2008 global financial crisis, and businesses and banks around the world have been affected. However, some experts in the financial sector such as Wall Street reporter Markus Koch have stated that he does not believe that a financial crisis like the one that occurred in 2008 is coming: «Lehman Brothers had completely different spillovers from the volumes behind it«. Now US regulators have been quick to react to SVB.

While the financial sector in Europe is in a panic, in Spain we have experienced a 3.5% drop in the IBEX and the banks have been affected with a drop of more than 6%. Although the EU economic commissioner, Paolo GentiloniHe does not see a great risk either because «there is a very limited presence of this bank» in Europe and expresses that although «we do not see direct consequences, we are closely following events and have taken note of the decisive reaction of the US authorities«.

Several public companies have disclosed that they held money in the SCV, including Roku and Roblox. The first of these, the streaming device maker, said it had $487 million, representing about 26% of its total cash holdings of $1.9 billion. And it has not been the only one, one of the most affected companies has been etsywho has seen how his dealer forum was inundated with complaints of late payments. The marketplace has sent emails to distributors to calm the situation: «Payments are being delayed “(…) due to recent developments related to Silicon Valley Bank, which Etsy uses to process payments to sellers.” We are working with our other payment partners to pay off your balance as quickly as possible.«, as shared by the portal eseller365.com.

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