Silicon Valley Bank, the 16th largest bank in America, has been shut down by US regulators.
It is the biggest collapse of a major financial institution since the global financial crisis of 2008.
Silicon Valley Bank has reported assets of around $209bn and deposits valued at $175.4bn.
Silicon Valley Bank crash
The state of the bank’s finances was under increasing spotlight this week after it launched a share sale to cover the losses resulting from higher interest rates.
Concerned investors, predominantly VC-backed start-ups and tech workers, rushed to make withdrawals prompting a run.
Shares plummeted more than 65% before US regulators stepped in and the US Federal Deposit Insurance Corporation (FDIC) seized its assets.
Banks across America, and indeed the rest of the world, are watching closely to see if the bank’s collapse will spook investors and put strain on the financial system.
Despite the alarm, analysts looking at the system as a whole aren’t reaching for panic buttons just yet.
Silicon Valley Bank’s strong focus on start-ups and the tech sector in particular left it overly exposed to the troubles within the technology industries.
With even the largest and best-established tech firms announcing major lay-offs, the sector has shown to be a volatile market.
Although SVB is one of the 20 largest lenders in the UAE, larger banks have a more diverse customer base, healthy balance sheets, plenty of capital and would be more likely to absorb withdrawals.
Silicon Valley Bank started the week by celebrating its position among Forbes magazine’s ranking of the best banks in America.
It is now in the position of overseeing the largest failure of a US bank since Washington Mutual more than a decade ago.
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