A three billion account with Silicon Bank Valley Bank (SIVB) was a crypto currency company. Ninety-five percent of depositors were considerable risk companies. Once the federal government takes control of Silicon Valley Bank and Signature Bank, customers should have access to their money on Monday.
But the cause of its downfall has been brewing for a while. During the period of almost zero interest rates, SVB invested billions in US government bonds, just like many other banks. As the Federal Reserve aggressively increased interest rates to control inflation, what once appeared to be a safe bet quickly unraveled.
Prior to its demise, Silicon Valley Bank, which was founded in 1983, ranked as America’s 16th-largest commercial bank. About half of all American venture-backed technology and life science startups received banking services from it.
Although the US federal government has intervened to guarantee customer savings, the collapse of SVB has continued to have an impact on international financial markets. Also, the government insured the deposits of the regional bank Signature Bank, which was on the verge of failure, and closed it down.
Today, Monday March 13, 2023, regional declines in bank stocks are occurring.
Invested in long term bonds when the fed is raising interest rates should have been a red flag for regulators. SVB did not invest in short term risk, if it did it would not have made any money. Bad management by the bank was a culprit in the demise of SVB.
The CEO told customers not to panic but that was not the answer depositors wanted to hear. Days before a historic bank catastrophe, the CEO of Silicon Valley Bank sold $3.6 million worth of stock in a potentially “problematic” transaction. The planned share-sale plans, also known as 10b5-1 plans, are criticized for having fundamental flaws, such as the fact that they don’t require mandatory cooling-off periods. The SEC makes amendments to modernize rule 10b5-1 insider trading plans and related disclosures.
“The changes to the rule update the conditions that must be met for the 10b5-1 affirmative defense. Specifically, the amendments adopt cooling-off periods for persons other than issuers before trading can commence under a Rule 10b5-1 plan. They also add a condition that all persons entering into a Rule 10b5-1 plan must act in good faith with respect to the plan. The amendments further provide that directors and officers must include representations in their plans certifying at the time of the adoption of a new or modified Rule 10b5-1 plan that: (1) they are not aware of any material nonpublic information about the issuer or its securities; and (2) they are adopting the plan in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5.” Source SEC.gov
This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC
Deposits will be protected, with no taxpayer support
I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise
– Jeremy Hunt (@Jeremy_Hunt) March 13, 2023
A Bank Term Financing Program is also being developed by the Federal Reserve to protect institutions impacted by the instability brought on by the SVB bankruptcy. Financial advisors tell consumers not to panic. This is in response to two bank collapses and significant actions taken by US authorities to protect depositors.
On Monday morning, the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC.
President Joseph Biden stated on Monday that “every American should feel sure their deposits will be there if and when they need them” in a speech meant to allay concerns about the US banking sector.
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