Why Silicon Valley Bank was liquidated and what is the lesson for Europe
Liquidation of the Silicon Valley Bank: the reasons for the bankruptcy, the intervention of the American authorities and the lesson for Europe. The comment by Teodoro Dalaveracuras
If one really wants to find something intriguing in the lightning-fast liquidation of the sixteenth American bank (in Italy, with approximately 175 billion dollars of deposits, it would be third after Banca Intesa Sanpaolo and Unicredit), one should cling to the news – reported by Reuters – that some customers of Silicon Valley Bank (SVB) reportedly withdrew their deposits this week on the advice of the Future Fund of Peter Thiel, a Silicon Valley heavyweight with a long history of on-and-off-again business relationships with Elon Musk.
But it's not worth it: when on Wednesday the SVB had to announce a loss of about 2 billion dollars on the sale of US Treasury securities, with the consequent need to raise the same amount with a capital increase, it was clear to all that the bank he desperately needed liquidity, because otherwise he certainly wouldn't have sold T-bonds at a loss for an equivalent value equal to a tenth of the balance sheet assets. In short, there was no need for the professional opinion of that sort of evil genius that some see in Thiel, to rush to withdraw their money. On Thursday, Svb shares lost two thirds of their value and on Friday, in the open market, the Federal Deposit Insurance Corporation (Fdic) took over, as Receiver, the Svb corporate complex through an ad hoc vehicle, the Deposit Insurance National Bank of Santa Clara (Dinb). End of the story.
By Monday morning – informs the official statement of the Fdic – all customers of the bank will get back the availability of the insured part (250 thousand dollars) of their deposits, while on the sums not covered by the Fdic insurance, within the next week they will receive a down payment on the final allotment and a certificate for the remaining credit.
SILICON VALLEY BANK IS THE FIRST VICTIMS OF THE RISE IN INTEREST RATES
Whether the SVB, the first illustrious victim of the interest rate hike that began just over a year ago, will be followed by others all over the world, and where, we'll see. What will certainly not be seen here in Europe is something similar to the speed and essentiality of the interventions of the American government to regulate at least the most pressing practical aspects of these calamities. Instead, there will be plenty of intrigues, without the need to bring in the oligarchs of Silicon Valley, as the stories of Crédit Lyonnais and Banco Ambrosiano (to mention just two of the main ones) teach.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/silicon-valley-bank-liquidazione/ on Sat, 11 Mar 2023 07:30:25 +0000.