Based in Santa Clara and with more than $US200 billion in assets, Silicon Valley Bank (SVB) was the 16th-largest in America, making it the biggest bank failure since the global financial crisis of 2008. The implications for financial markets and the global economy are big.
abc.net.au/news/silicon-valley-bank-collapse-us-recession-ripple-effects-world/102089926When news broke that Silicon Valley Bank was in dire trouble, US investors, who still have vivid memories of the global financial crisis, naturally panicked.
Levi says he became "more concerned by text messages, emails, and notes about VCs telling their Portcos to move funds out".By the time Levi and the other investors decided to pull their money from the bank, the "SVB site was down, my account was blocked, and bankers were unreachable". Based in Santa Clara, and with over $US200 billion in assets, SVB was the 16th largest bank in America, making it the biggest bank failure since the global financial crisis of 2008.
On Monday , Treasury Secretary Janet Yellen, Federal Reserve Board chair Jerome Powell and Federal Deposit Insurance Corporation chairman Martin Gruenberg announced "decisive actions to protect the US economy" by ensuring that depositors would be protected.Despite that, there are fears that the collapse of Silicon Valley Bank could still have ripple effects across the globe.
He says SVB was "an artery" for tech startups and venture capital financing for decades, and its disappearance could leave startups struggling to get funding.Meanwhile, Betashares chief economist David Bassanese fears the collapse of SVB could spark a US recession, which would in turn exacerbate Australia's current economic problems and raise the risk of a recession here.
"They bought treasuries and bonds. Where the value decreased, as the Fed raised rates, was significantly and ultimately, their assets were lower than their liabilities."The Federal Deposit Insurance Corporation took control of Signature, which had $US110.36 billion in assets and $US88.59 billion in deposits at the end of last year, according to New York state's Department of Financial Services.
A spokesman for Canva told ABC News the company was "in the fortunate position of having the majority of our cash outside of their banking system and have safety nets in place to ensure our operations aren't compromised"."Not everyone is as lucky as us and we'll be on the lookout over the days and weeks to come to see if there are ways we can be supportive of the broader ecosystem," Canva said.
Treasurer Jim Chalmers said they were aware Australian firms were impacted and the government was monitoring "potential impacts for Australia caused by the collapse". Every says deposits in SVB were largely made by tech startups and "rich Californians and Democratic party donors, reportedly including Harry and Meghan, and Oprah".
Ives says unlike with the global financial crisis, the SVB collapse does not pose a systemic risk" because the world's biggest banks are "extremely well capitalised" post the GFC. This, he says, "could definitely cause startups to fail, potentially merge or look for alternative financing"."This is going to put even more pressure on tech startups. It ripples to Australia, to Asia, to Europe to the rest of the world, because it all starts in Silicon Valley. It's a spider web that's tied together.
He warns despite depositors being protected, investors "may still panic" and "we may well see more bank failures".
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