Silicon Valley Bank

Main article: US banks

2023

Chinese depositors' Cayman Islands bank accounts seized by FDIC

In May 2023, it was revealed that the Cayman Islands Currency Authority had engaged lawyers to assess its legal capabilities after deposits at a Silicon Valley Bank branch in the territory were seized by the FDIC.

A government official met Chinese savers whose accounts were devastated after the collapse of the SVB.

First Citizens BancShares agrees to buy SVB

On March 27, 2023, it was announced that First Citizens BancShares Inc. had agreed to buy Silicon Valley Bank. The lender accepts $56 billion in deposits and $72 billion in loans.

The FDIC says the estimated cost of the SVB collapse is $20bn.

HSBC buys UK branch of bank for £1

HSBC Holdings Plc is buying Silicon Valley Bank's UK arm, the culmination of a frenzied weekend of ministers and bankers exploring various ways to prevent the collapse of SVB.

HSBC UK Bank plc, acquires Silicon Valley Bank UK Limited (SVB UK) for £1, "HSBC said in a statement on 13 March 2023.

Bank collapse is biggest US credit institution bankruptcy since 2008

On March 10, 2023, Silicon Valley Bank collapsed and came under the control of FDIC - Federal Deposit Insurance Corporation, all the bank's business operations went into external management. On March 13, 2023, the FDIC will pay insured deposits, and later begin the process of liquidating the bank's assets and paying out as part of the proportional distribution of the certificate among other uninsured investors.

Silicon Valley Bank became the largest American lender to collapse since the bankruptcy of Lehman Brothers on September 15, 2008, which launched a chain reaction of devastating events. The collapse of SVB followed almost simultaneously after the bankruptcy of Silvergate Capital One.

Largest Bank Bankruptcies in the UStna 2023

So, what happened? SVB had over 120 billion investments in securities, which are almost completely distributed in debt securities. Over 85% of the investment structure was long-term bonds with a clear tilt in mortgage bonds in the MBS segment (58 billion).

SVB's investment portfolio was 54%, which is the absolute maximum among American banks. Closest State Street competitor with 42%

In March last year, the Fed began a cycle of tightening the monetary policy, by October rates on the debt market were prohibitively high, and then SVB began to have problems. A significant part of the investment was in fixed-rate bonds, which collapsed badly in price.

By the end of 2022, SVB's unrealized loss rose to $16 billion compared to $500 million in Q1 2022 - all damage solely due to rising rates.

As a result, SVB began to cut losses, shifting to short-term Treasuries, bonds with a variable coupon, increasing haging in the derivatives market. It did not help, because the bank's capital amounted to 16.2 billion as of December 2022.

In February 2023, after another rush of rates, the balance sheet became negative (losses exceeded 20 billion) and everything fell.

The bank's collapse was accelerated after a raid by investors who tried to pull out deposits literally in the last 7-10 days after information appeared in the media about potential problems in the bank.

The final trigger was precisely the raid of investors, and the problems were accumulated and structural, at least from mid-2022, but SVB skillfully masked these problems, drawing fabulous earnings reports of $1.7 billion in 2022, having a hole of more than 20 billion, which is three times higher than the bank's revenue.

SVB collapse is extremely important in terms of weighing potential risks. What is the peculiarity of this event? Masking problems and swiftness, wrote the channel Spydell Finance.

Unlike Lehman Brothers, where the first problems in the media were manifested in early 2008, and the severity of the problems was revealed in the summer of 2008, everything was different with SVB.

Contortively, potential problems among insiders were highlighted in October 2022 (then the shares collapsed by 30%), but the bank's management, in fact, falsified the reality to such an extent that by the beginning of February 2023, the shares restored all losses with accumulated growth over 75% in just 1.5 months.

Silicon Valley Bank CEO Greg Becker sold $3.6 million in stock less than two weeks before the bank went bankrupt.

10 days before bankruptcy in early March 2023, at a gala concert in London, SVB was recognized as the best bank in the Bank of the Year nomination, and SVB's chief executive officer cynically abused common sense and investor confidence, giving confidence that "the situation is under control and the problems are far-fetched."

At this very moment, SVB traders restructured a hole in the balance sheet of 20 billion, having capital of 16 billion with a fake profit in reporting of 1.6 billion. Only after the bank was attacked by hedge funds and competitors in venture capital (a week before bankruptcy) did investor raids begin with the withdrawal of deposits from SVB for 40 billion (over 20% of the deposit base).

Actually, this undermined the bank. The crushing collapse of investment due to rising rates could somehow be balanced through falsification of reporting and the derivatives market, and there was nothing to cover the raids.

Customers were withdrawing deposits and SVB began experiencing capital shortages. The bank was forced to sell all its bonds with a loss of $1.8 billion and tried to urgently raise capital in the amount of $2 billion. But he could not raise money and collapsed.

Silicon Valley bank shares were in the S & P500 and Russell.

Other American banks hardly feel much better - Bank of America's unrealized losses (gap in market value and fair value) are 43% of total capital, State Street - 27%, in Wells Fargo - 25%, in US Bancorp - 24%. Obviously, other world banks have exactly the same problem.

SVB's challenges are to invest a strategy on long-term fixed-income bonds with inadequate diversification and no haggling. SVB, like many hedge funds, assumed that zero rates would be eternal.

The second problem is rising rates due to Fed policy and investor raids in early March 2023.

SVB tried to raise several billion in emergency funding, but did not have time.

Another thing that surprises is swiftness. Not even two days, but a matter of hours. In fact, less than 30 hours have passed from the first obvious and public problems to the liquidation procedure.

This may indicate rather not the size of the hole in the balance sheet, but the agreed policy of the Fed, the US Treasury and the FDIC together with primary dealers.

It couldn't have been without their approval and involvement. There is practically tracing paper with Lehman Brothers, which collapsed with the direct participation of famous people in the Fed, the Ministry of Finance and the largest US banks.

The bankruptcy of Lehman was necessary (as a sacred victim) to create a fully manageable trigger to legitimize the TARP program, unthinkable at that time, and asset buybacks by the Fed. It was only then that they began to beat liquidity in all directions in an unlimited amount on demand without a motivational component, but not in 2008 (then the world was different).

Then insiders earned record profits that were never blocked after 15 years (in terms of speed and volume), because interested parties bought out the market when everyone was selling.

It is difficult to say what kind of plan they have now.

Shares crash 60% after announcing plans to sell $2.25 billion shares to strengthen financial position

On March 9, 2023, shares of parent Silicon Valley Bank fell 60%, reaching their lowest level since April 2020.

Holding company Silicon Valley Bank has announced it is seeking to raise $2.25 billion from the share sale to bolster its financial position.

SVB at this time is a major lender to startups, especially in the technology sector and has suffered from lower prices in this market. The collapse of its shares dragged the entire banking sector behind it.

Interestingly, JP Morgan Bank recommended taking a closer look at buying the collapsed shares of SVB Bank at the end of 2022. As a result, their shares were tripled, and trading was suspended.

2022: How big the bank was

The bank's main specialization was the provision of financial services to technology startups with an explicit focus on venture financing.

According to the reporting at the end of 2022, the bank had about $209 billion in assets, and the source of funding was client deposits worth 175 billion. There is no clarity about the volume of insured deposits - there are apparently several times less of them (about 7%).

What is 200 billion assets for the United States? Among commercial banks, SBV ranked 16th in assets, according to Fed data. If you isolate the investment banking units by allocating only the assets of banks within the dollar system, the following is obtained:

• Capital One Financial Corporation – 452 млрд,
• Goldman Sachs - 439 billion,
• The Bank of New York Mellon - 236 billion,
• Morgan Stanley - 209 billion,
• State Street Corporation - 209 billion,

I.e. SVB at the level of monsters level Morgan Stanley, State Street and Bank of NY Mellon!

US divisions in the United States of international banks:

• HSBC Bank USA - 231 billion,
• UBS - 201 billion,
• Barclays - 179 billion,
• Santander Bank - 166 billion,
• BNP Paribas - 143 billion,
• Deutsche Bank - 106 billion,
• Credit Suisse - 80 billion.

As you can see, SVB is second only to HSBC.

If we combine global assets taking into account the investment bank division, then by assets the largest American financial structures:

• JPMorgan Chase & Co - 3.66 trillion,
• Bank of America Corporation – 3.05 трлн,
• Citigroup Inc - 2.11 trillion,
• Wells Fargo & Company - 1.88 trillion,
• Goldman Sachs - 1.44 trillion,
• Morgan Stanley - 1.18 trillion,
• U.S. Bancorp - 0.67 trillion

2020

£4m investment in TransferGo service

TransferGo has received £4m from Silicon Valley Bank to develop instant transfers. This became known on November 24, 2020. Read more here.

Investment in African startup Healthlane

On August 27, 2020, it became known that Silicon Valley Bank and the graduate venture fund Digital Horizon invested Y Combinator -. Healthlane This startup intends to build an ecosystem in an area medicine that facilitates access to services health care in countries Africa based on the existing offline infrastructure. More. here

2013

In 2013, Silicon Valley Bank was a bank providing services to companies engaged in the field of high technologies, biomedical sciences environmental technologies, venture capital, direct investments and branded wine production.

Silicon Valley Bank and its affiliates, part of SVB Financial Group, provide industry knowledge and connections to their clients around the world; funding; services in financial operations management, corporate investments and international financial transactions in 27 offices in the United States and seven international divisions in China, India, Israel and the United Kingdom.