Here's what to know about why Silicon Valley Bank failed and what happens next
The most immediate problem is the bank's large deposits. The Federal government insures deposits to $250,000, but anything above that level is considered uninsured.
How did this happen? Here's what to know about why the bank failed, who was affected most, and what to know about how it may, and may not affect, the wider banking system in the US.Silicon Valley Bank was hit hard by the downturn in technology stocks over the past year as well as the Federal Reserve's aggressive plan to increase interest rates to combat inflation.
But Silicon Valley's customers were largely startups and other tech-centric companies that started becoming more needy for cash over the past year. Venture capital funding was drying up, companies were not able to get additional rounds of funding for unprofitable businesses, and therefore had to tap their existing funds — often deposited with Silicon Valley Bank, which sat in the centre of the tech startup universe.
The most immediate problem is Silicon Valley Bank's large deposits. The Federal government insures deposits to $250,000, but anything above that level is considered uninsured. A bank buying Silicon Valley Bank could go a long way to resolving some of the problems tied with the money that startups can't get to right now.At the moment, no, and experts don't expect there to be any issues spreading to the broader banking sector.
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