Silicon Valley bank collapses, unleashes global financial debacle

MUMBAI: Silicon Valley Bank, a four-decade-old US lender, collapsed on Friday into Federal Deposit Insurance Corporation (FDIC) receivership, after its longstanding client base of tech startups became concerned and snatched the deposits. Receivership typically means that one bank’s deposits will be taken over by another sane bank or the FDIC will pay depositors up to the $250,000 insured limit
California banking regulators will dispose of his assets, moving quickly to protect depositors as a crisis spread across global markets and hit bank stocks. The bank had $209 billion in assets and $175 billion in deposits at the time of the bankruptcy, the FDIC said in a statement.
Santa Clara-based SVB’s liquidity problem came to light on Thursday evening, as a result of which its share price plunged by more than half and another 69% in pre-market trading on Friday. The bank faced a run after which its shares hit a seven-year low and trading was suspended.
The impact of the SVB’s problems spread rapidly around the world, leading to a crash in financial data on both sides of the Atlantic and wiping out hundreds of billions of dollars, market data showed. Investors around the world are also keeping their fingers crossed after US Treasury Secretary Janet Yellen indicated on Friday that SVB wasn’t the only lender facing challenges.
The impact of SVB’s woes was also felt in Dalal Street on Friday. As investors hit the sell button, sensex fell more than 900 points in early trading, but some bottom fishing helped it close at 59,135, down 671 points or 1.1% in the course of the day. Like their global counterparts, banking and financial stocks in India also led the decline with the BSE Banking and Financial Services Indices finishing around 1.8% down.
Also rising expectations of a 50 basis point (100 basis points = 1 percentage point) hike in the US interest rate later this month, which could affect foreign investor interest in emerging market securities, including India had a negative impact on investor sentiment, market participants said. On BSE, among the sensex constituents, the top six losers of the day were all from the BFSI sector: HDFC Bank, HDFC, SBI, IndusInd Bank, Axis Bank and Bajaj Finserve.
Retail investors, meanwhile, continued to put money into the equity market via the MF route even as debt fund investors remained cautious as interest rates remained at an elevated level. Monthly flows through SIP in February showed a marginal decline from January’s figure, but industry players attributed this to the shorter month. In February, the equity mutual fund schemes together recorded a net inflow of Rs 15,686 crore, up from Rs 7,303 crore in December 2022, AMFI said.


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