Several mutual funds recommended withdrawing their assets from Silicon Valley Bank (SVB), one of the 20 largest banks in the United States, after being forced to sell part of his portfolio at a losswhich set off alarm bells in the global financial sector due to a possible systemic effect.
For her part, Treasury Secretary Janet Yellen said her department is monitoring “some” banks for problems in SVBin an appearance before the Ways and Means Committee.
SVB, founded 40 years ago and specializing in providing financing to Silicon Valley technology startups, suffered a fall of more than 60% on Thursday in its shares at the close of the Nasdaq wheel and this Friday it operated with a loss of 69% in the pre-market until its listing was paralyzed.
The collapse extended to the listing of the main world banks, leading them to the worst week since 2020 and occurred after SVB anticipated to the United States Securities and Exchange Commission (SEC) losses of US$ 1.8 billion in the first quarter and an accelerated placement of shares of US$ 1,750 million to clean up its capital position after having registered heavy losses in its investment portfolio, the Bloomberg and DPA agencies specified.
This portfolio consisted mainly of US treasury bonds whose values fell since the interest rate hikes ordered by the Federal Reserve (FED).
The bank was forced to part with it after a strong outflow of depositors, reflecting the drop in activity among startups in particular and the technology sector in general in recent months.
fears
Fears about the financial standing of SVB – the 16th largest bank in assets in the United States – prompted venture capital firms including Funder Fund, Union Square Ventures and Founder Collective They will advise withdrawing the funds from the bank.
For their part, various clients reported difficulties when withdrawing their funds.
In a note to its clients, Founder Collective said that “in the long term, we don’t think deposits are at risk, but in the short term it is more difficult to predict.”
Meanwhile Garry Tan, CEO of Y Combinator, a renowned startup incubator, warned that the risk of insolvency is real and recommended limiting exposure to the bank.
SVB’s CEO tried to stem the run on Thursday by asking clients and investors to calm down in a 10-minute conference call, a source familiar with the situation told Bloomberg.
Tip of the iceberg
After the bullfight, CNBC reported this Friday that SVB failed in its attempts to raise new capital and hired advisers to explore a potential sale of its assets to another financial institution.
The fall of SVB, adds to that of the Slivergate bank this week, which extends a blanket of doubts about the sector regarding whether they are isolated events or the anticipation of a crisis.
“I’m not worried about the big players but many of the little ones are going to have terrible kicks. SVB is just the tip of the iceberg,” warned consultant Christopher Whalen.
Warning
Regulatory authorities since the 2008 crash have focused on ensuring the stability of large banks, for example, forcing them to have higher reserve requirements, which led to the neglect of smaller entitiessome of which bet on technology or cryptocurrency platforms such as Slivergate.
Michael Barr, the Fed’s vice president for supervision, acknowledged this stance, noting that larger institutions are also exposed to these risks but that exposure “tends to be a very small part of their balance sheets.”
Similarly, Morgan Stanley analysts ruled out a systemic risk and recalled that there are large differences between large banks with greater liquidity and diversified portfoliosand others such as Slivergate and SVB, specialized in certain customer profiles with higher risk.
Mike Mayo, a director at Wells Fargo warned that “SVS is a clear warning of financial risk outside of the big banks.”
“What we saw with this medium-sized bank includes, by extension, private capital, and the fintech universe,” Mayo said.
