11 Mar 2023

Silicon Valley Bank: America's 16th Largest Bank To Shut

New York: Regulators have ordered to close Silicon Valley Bank, America's 16th largest bank. California's Department of Financial Protection and Innovation has issued this order.

Shares of the bank's parent company SVB Financial Group fell by nearly 60% on 9 March. After this it was stopped for trading. This is the biggest failure in US history since the 2008 financial crisis.

The move makes SVB the largest retail bank to fail since 2008.

"It's the second day of concerns around the banking sector and questions whether this reflects any systemic risk," said Angelos Kourkafas of financial services firm Edward Jones adding the confidence had been a bit shaken.

SVB's problems were sparked by customer withdrawals that led the company to liquidate securities positions whose values had plummeted due to the Federal Reserve's interest rate hikes.

American banks lost $ 100 billion in the stock market

US banks have lost $100 billion in the stock market in the last 2 days due to the fall of SVB's shares. At the same time, European banks have suffered a loss of 50 billion dollars.

European equity markets ended sharply lower, with London stocks sliding 1.7 percent while both Paris and Frankfurt dropped 1.3 percent.

Asian stocks also posted steep losses.

All insured depositors will be free to withdraw their deposits

The Federal Deposit Insurance Corporation (FDIC) announced on Friday a Silicon Valley bank takeover. Along with this, he has also been given the responsibility of keeping the money of the customers safe. Silicon Bank will now open on March 13, after which all insured depositors will have the freedom to withdraw their deposits.

Deposits up to Rs 2.5 crore are covered by FDIC insurance

The bank had assets of $209 billion and deposits of $175.4 billion by the end of 2022. 89% of this amount was not insured. Customer deposits up to $250,000 (Rs 2.5 crore) are covered by FDIC insurance. That is, even after the closure of the bank, this money will be returned to the customer.

At the same time, there is no guarantee that the depositors who have deposited more than this amount in their accounts will get all their money back or not. However, the FDIC will issue a certificate to such customers. Under this, after the fund is recovered, the money will be returned to them first.

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