Failure of Silicon Valley Bank
Investing PlanningToday we witnessed a dramatic bank failure!
We'll learn more about it in the coming days as the dust settles.
But here's what we know so far:
- March 9th, shares of SVB Financial plunged more than 62% after the company proposed a share sale to shore up it's balance sheet which had suffered a $1.8 billion loss on the sale of Treasury securities due to rising interest rates.
- Following the news, several venture capitalist firms advised their portfolio companies to withdraw their money out of SVB contributing to a bank run.
- SVB shares fell another 66% in pre-market trading March 10th before trading was halted and US Federal regulators rushed in to seize the bank's assets.
- The state regulator appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC transferred insured deposits to a new institution, the Deposit Insurance National Bank of Santa Clara.
Before you begin conjuring up images of the 1930's Run on Banks... please know that it's not that!
Don't be alarmed.
We think this was a rather isolated event caused by a confluence of unique factors affecting SVB that should not affect most other banks (read more here).
- I don't see this as a systemic failure
- I don't see this spreading beyond niche banks
- I don't think this will be a systemic wide run on the banks
With that being said, this is a good time to circle the wagons, so to speak.
- Take inventory of your bank accounts (savings, checking, cd's)
- Verify that your account(s) are covered by FDIC limits
- Connect with your banker and shore things up
And don't hesitate to reach out to me directly if you have questions, want to talk about your situation, or know someone who needs help (especially if they were SVB clients).