Published - March 13, 2023 @ 3:41 PM (EET)
On Sunday, US authorities launched emergency measures to restore confidence in the banking system after SVB's collapse threatened to trigger a broader financial crisis.
The announcement comes after customers pulled billions of dollars within 24 hours from Silicon Valley Bank (NASDAQ:SIVB) after the lender disclosed a loss of almost $2 billion that forced federal regulators to shut down the bank on Friday, making it one of the largest bank failures in US history.
Regulators, including the Treasury Department, Federal Reserve, and Federal Deposit Insurance Corp., acted to contain the potential fallout on numerous fronts.
The FDIC stated it would resolve SVB in a way that "fully protects all depositors." At the same time, the Fed announced a new "Bank Term Funding Program," offering one-year loans to banks under more accessible terms than it typically provides. The central bank also relaxed terms for lending through its discount window, its main direct lending facility.
Though the measures provided some relief for Silicon Valley firms and global markets on Monday, worries about broader banking risks remain and have cast doubts on whether the Fed will continue with its plan for aggressive interest rate hikes.
WHAT HAPPENED
Last week, shares of SVB Financial, the parent company of Silicon Valley Bank, plunged over 39% after announcing a significant loss on its bond holdings and plans to shore up its balance sheets.
SVB told investors it lost nearly $2 billion selling assets following a larger-than-expected decline in deposits, and since then, the stock has lost more than 80%, with tech clients rushing to pull their stakes over concerns about the bank's health.
Once a darling of the banking business, the lender's parent company, SVB Financial Group, was racing to find a buyer after scrapping a planned $2.25 billion share sale on Friday morning. However, regulators weren't willing to wait.
Within hours, the California Department of Financial Protection and Innovation closed the bank Friday and put it under the control of the FDIC.
