Despite being hailed as one of ‘America’s Best Banks’ by Forbes magazine about a month ago, the Silicon Valley Bank (SVB) was forced to shut shop on Friday (March 10).
In an article (archive) dated February 16, 2023, the American business magazine released its 14th annual list of the 100 best banks in the country. Forbes reportedly factored in key-performing metrics such as growth, profitability, non-performing assets (NPAs) and credit quality to make the assessment.
The SVB Financial Group (parent company of Silicon Valley Bank) was placed at 20th position in the list of ‘America’s Best Banks.’
In a tweet on March 7, the SVB Financial Group acknowledged the Forbes magazine’s recognition of its financial health. “Proud to be on Forbes’ annual ranking of America’s Best Banks for the 5th straight year and to have also been named to the publication’s inaugural Financial All-Stars list,” it had said.
The archive of the tweet can be accessed here. And just 3 days later, the bank was forced to close down by regulators after being in operation for the past 40 years.
The Background of the Controversy
On Friday (March 10), the Federal Deposit Insurance Corporation (FDIC) announced the shutdown of the US-based Silicon Valley Bank (SVB) and the seizure of its assets.
The development was the result of the sudden shutdown of Silvergate Capital Corp and the unmindful fundraising of SVB, which created panic in the technology industry.
FDIC: “Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.” pic.twitter.com/trqGu83CUB
— Steve Lookner (@lookner) March 10, 2023
Founded in 1983, Silicon Valley Bank operated out of Santa Clara in California, and provided various services such as online banking, treasury management, and foreign exchange trade.
Reportedly, the crisis came to light on March 8 this year after SVB Financial Group (parent organisation of Silicon Valley Bank) announced a sale of $21 billion of its securities.
This was further worsened by the sale of company shares worth $2.25 billion to shore up its finances, prompted by high deposit outflows at the bank, caused by a downturn in the startup industry. As a result, the Silicon Valley Bank shares fell 60%, leading to a whopping loss of $80 billion.
➡️On Thursday, March 9
— FORTUNE (@FortuneMagazine) March 10, 2023
CEO Greg Becker urged calm during a zoom call with venture firms.
📉But shares of SVB still crashed by roughly 60% in regular trading. https://t.co/CRYGieAMCE pic.twitter.com/r4yyAoXN5K
To salvage the business, SVB CEO Greg Becker held a conference call with clients and venture capital investors, requesting them to “stay calm” to avoid further withdrawals.
However, it was to no avail. Many venture capitalists instead instructed portfolio companies to minimise their exposure to Silicon Valley Bank, withdraw their cash, and look for other lenders (thus further exacerbating the crisis).
