The Story of the Collapse of a Bank in Hours:  The Silicon Valley Bank collapsed on Friday, during a record period of no more than 40 hours, due to bank inflows and a capital crisis, which led to the second largest collapse of a financial institution in the history of the United States of America in 15 years.

Although not widely spread outside of Silicon Valley, Silicon Valley Bank was among the 20 largest US commercial banks, with total assets of $209 billion at the end of last year, according to the Federal Insurance Corporation.

So we are now witnessing the largest bank collapse since the collapse of Washington Mutual in 2008.

California regulators shut down the Silicon Valley Bank on Friday, placing it under the control of the US Federal Deposit Insurance Corporation, which acts as the recipient. This means that it will liquidate the bank’s assets to pay the amounts owed to its customers, including depositors and creditors.

The company said that all insured depositors will have full access to their insured deposits no later than Monday morning, confirming that it will pay uninsured depositors a return in advance within the next week.

The beginning of a story

The crisis erupted on Wednesday, when the Silicon Valley Bank – which was founded in 1983 – announced the sale of a group of securities at a loss, and its intention to collect about $ 2.25 billion in new shares to support the balance sheet, and fill a gap in its financial resources resulting from the sale of part of it. Portfolio of bonds has been hit hard.

This sparked panic among the major venture capital firms, which reportedly advised the firms to withdraw their money from the bank.

It didn’t last long. On Thursday, the company’s stock fell by 60 percent. What left an impact on some other banks. By Friday morning, trading in Silicon Valley Bank’s shares had ceased, amid reports that the bank was unable to raise all the money it needed and was looking for a buyer.

This was followed by the suspension of the shares of a number of banks, including “First Public”, “Bac West Bancorp”, and “Signature Bank”.

What angered some, however, was the mid-morning time when the Federal Deposit Insurance (FDIC) took over the bank. In most cases, the agency should wait until the market closes to take action.

“The state of Silicon Valley Bank has deteriorated so quickly that it cannot last just another 5 hours,” writes Butter Markets CEO Dennis Kelleher.

He added, “This is due to the speed of depositors withdrawing their money, and closing during the day was inevitable due to the classic banking race.”

On Friday, US Deputy Treasury Secretary Wally Adeyimo sought to reassure the public about the health of the banking system after the sudden collapse of Silicon Valley Bank.

US Treasury Secretary Janet Yellen held an unscheduled meeting of financial regulators to discuss the collapse of Silicon Valley Bank, a major lender to the battered technology sector.

And according to OANDA Senior Market Analyst Ed Moya, small banks that are disproportionately tied to cash-strapped industries like technology and cryptocurrency may have a tough road now.

He added, “Everyone on Wall Street knew that the campaign to raise interest rates would eventually cause great harm, and now it is leading to the collapse of small banks.”

banking sector crisis

The collapse of the “Silicon Valley” bank has shaken the markets and raised uncomfortable questions, foremost of which is will it undermine the broader banking system and start a new collapse?

Despite the initial panic on Wall Street about the collapse of Silicon Valley, analysts said the bank’s collapse was unlikely to lead to the kind of chain reaction and contagion among the banking industry during the financial crisis.

Billionaire hedge fund manager Bill Ackman compared the collapse of Silicon Valley to the collapse of Bear Stearns, the first bank to collapse at the start of the 2007-2008 global financial crisis.

Ackman posted on Twitter, saying, “The risk of failure and deposit losses here is that the next less capitalized bank will face flight and failure.”