Silicon Valley Bank: The Great Recession’s largest financial disaster 2023

US officials shut down and seized Silicon Valley Bank (SVB) in response to a rush of consumers to withdraw their assets, but how does this affect British businesses?

From its founding in 1983, the startup environment has been important to SVB’s commercial operations. With a history of investing in future household brands, such as Cisco Systems and Shopify, the bank has a generally positive image in the financial industry. Customers withdrew an estimated $42bn, or a quarter of the company’s entire deposits, in a single day, severely damaging the company’s image.

Then why did Silicon Valley Bank fail?

In the last year, rate rises and increasing inflation have thrown a shadow throughout the globe. Several in the business have referred to tech valuations as a bubble, forcing venture capitalists to write off billions of pounds from their holdings.

SVB, the sixteenth biggest bank in the United States, revealed on Wednesday that it intends to raise up to $1.75 billion in capital to strengthen its balance sheet, after the sale of a $21 billion loss-making bond portfolio. Similar to the Great Recession of 2008, clients rushed to withdraw assets, and the SVB share price plummeted by a whopping 69%.

How will Silicon Valley Bank’s issues impact the United Kingdom?

Standard Chartered and HSBC, two darlings of the FTSE 100, had their share prices decline by more than 4.5% as a result of the tremors. As a result of SVB’s unexpected collapse, it is believed that the value of European and British lenders plummeted by over £30 billion.

With clients such as HelloFresh, Moonpig, and Notonthehighstreet, SVB’s future in the United Kingdom is a heated subject. Although the bank claims that its “British company is a separate entity,” bankruptcy is a distinct possibility for its British operation.

In the following weeks, the impact of SVB’s demise will be a focal point. The frightened markets create an intriguing background for Wednesday’s Spring Budget.

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