Silicon Valley Bank Collapse - Who Might be Next?

Tuesday 14th March, 2023

As undercapitalised, Silicon Valley Bank (SVB) collapses, there are further warnings that other banks, such as Credit Suisse might be about to follow suit.

The news comes as two senior executives at SVB face lawsuits over their attempts to cover up the risks facing the bank and their ability to overcome them. The collapse is the biggest US banking failure since 2008, and has global repercussions. 

After the bank failed in its attempt to raise further capital on Friday, on Monday, the UK government announced that HSBC would take over the UK arm of the bank, after more than 200 leaders of UK tech companies signed a letter calling for government intervention.

Silicon Valley Bank had operated in a niche but key part of the global economy; technology companies. Those technology companies deposited and borrowed money from the bank and over the pandemic, with worldwide digital use expanding, had been thriving. 

But with interest rates rises causing the bonds that the bank had invested in to fall in value, and economic factors causing customers to take cash out of the bank at a rate it could not cover, it was having to sell bonds at a heavy loss in order to reimburse them. 

On Sunday, the US government stepped in to announce that businesses should be able to access their money from Monday (13th). 

In the UK, the hopes are that the announcement from HSBC will calm nerves.