After selling securities at a loss, the Silicon Valley Bank got into trouble.
Image: Reuters
A niche bank specializing in start-up financing in the USA has to carry out a capital increase because high losses were realized on bonds. This is causing bank stocks to plummet around the world. Harbinger of a new financial crisis?
Dhe quake started in California on Wednesday. Silicon Valley Bank announced a $2.25 billion emergency capital increase. The reason was that a loss of $1.8 billion had to be booked after selling securities, mainly bonds, whose values fell significantly after the interest rate turnaround.
What followed was an epic fall in the share price of the Silicon Valley Bank, which specializes in financing loss-making start-ups and is also active in Germany with this business model, the allocation of “venture debt”, i.e. venture capital. The shares lost 60 percent of their value on Thursday and were initially suspended from trading on Friday. In the meantime, the capital increase has failed and the bank is in sales talks, reported the American news channel CNBC on Friday afternoon. The money house has been temporarily closed and placed under state control, the US deposit insurance FDIC announced on Friday. To protect customers, all of the bank’s insured deposits have been transferred to a new special purpose entity. Customers should have access to this money again by Monday morning at the latest. According to the FDIC, the bank had $209 billion in assets under management and about $175.4 billion in customer deposits at the end of December. It is initially unclear how much of this will be covered by the deposit insurance.