A few days before the FDIC’s announcement, there was no significant indication of the more significant problems of the sixteenth largest lender in America with assets of around two hundred billion dollars. Although the financial situation of the bank has worsened over the past few years, the management tried to save the situation, especially by announcing a capital increase of more than two billion dollars on Wednesday, March 8.
The bank was supposed to get about 1.25 billion dollars by subscribing ordinary shares, half a billion dollars by selling preferred convertible shares and another 500 million dollars by selling shares to the investment group General Atlantic. The reason for the capital increase was $1.8 billion in losses from the sale of mortgage-backed securities and government bonds. Even so, two days later came the announcement of bankruptcy.
The reason was the massive withdrawals of venture capital clients, the amount of which reached a total of 42 billion dollars as of Thursday midnight. This was almost a quarter of the bank’s deposits. The inappropriate communication of the head of the bank, Greg Becker, towards clients on Thursday also contributed to the downfall of the bank. According to TechCrunch he urged them to remain calm in a video call. He then ended the interview with the sentence: “The last thing we need is panic.” It was precisely this that was the last impetus for the opposite behavior of companies.
The collapse of the bank, which had been operating on the market for more than forty years, immediately sparked a discussion in the US. The FDIC and the Fed are considering creating a fund that would allow regulators to bail out deposits at other banks that run into similar problems. The fears that now prevail in the US have caused a fall in the shares of other financial houses that, like Silicon Valley Bank, focus on financing startup and venture capital projects.
For example, First Republic Bank shares fell 15 percent on Friday, bringing the bank’s weekly loss to 34 percent. PacWest Bancorp recorded a similar decline. Western Alliance Bancorp shares even fell to the lowest level since November 2020. Regulators reacted to the whole situation according to Bloomberg findings already on Saturday by contacting the management of several small and medium-sized banks, including First Republic Bank. The main question was about their financial situation.
The collapse of the American Silicon Valley Bank also affected some Czech companies. She is one of them according to CzechCrunch website information a Fitify startup developing a mobile fitness app. According to co-founder Martin Mazance, Fitify managed to withdraw a large part of its money from its primary US account at the failed bank on Thursday night. But it will probably cost several hundred thousand dollars. However, according to Mazanka, it should not endanger the company during operation.
Other banking players have already shown interest in the assets of the failed Californian bank. The British bank The Bank of London is reportedly considering an offer to buy the British division of the American Silicon Valley Bank. Sky News reported about it on Saturday.
