How did Silicon Valley Bank collapse in the US? Impact on Indian markets as well

America’s famous bank Silicon Valley Bank (SVB) collapsed. This is the biggest bank failure in America since 2008. This is a bank that has provided financial assistance to banks including in India. The share price of the bank fell by up to 60%. The bank collapsed as panicked investors withdrew their money. The bank’s collapse on Friday also hurt Indian stock markets.

California’s Department of Financial Protection and Innovation (DFPI), the banking regulatory agency, announced the bank’s closure on Friday. Then the Federal Deposit Insurance Corporation (FDIC) announced the bank’s closure last Friday and took over deposit control. It has also been informed that the investors who have insurance will be refunded from tomorrow.

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The US Fed’s continuous hike in interest rates to control inflation has hit the bank. Due to this, the debentures in which the bank invested lost. Then the bank could not make loans attractive. With this, startups who are the main customers of the bank faced a huge funding crisis. With this, they withdrew the money from their accounts in large quantities.

The bank was forced to sell the bonds at a low price to overcome the crisis. Investors panicked when this news broke. Deposits were withdrawn en masse. With this, the bank went into a big collapse. Along with this, the bank also faced a setback in the stock market. Shares of the bank’s parent company, SVB Financial Group, fell as much as 60%.

Before this, the global financial crisis was caused by the collapse of Lehman Brothers in 2008. The collapse of Washington Mutual during this time was the largest banking collapse in US history. SVB’s is the biggest fall after this.

The collapse of SVB hit the stock prices of bank-financial institutions globally. The collapse of the bank has thrown the start-up companies into a serious financial crisis.

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