Silicon Valley Bank triggered a panic in the banking sector on Friday, with shares in leading lenders around the world plunging, after it dumped assets to raise cash to cover withdrawals. | News24_Business
The parent company of the commercial bank, SVB Financial Group, announced Wednesday that it would try to raise $2.5 billion in fresh funds through a share offering, after having sold off $21 billion in securities at a loss of $1.8 billion .According to sources to Bloomberg, investment funds were advising their clients to withdraw their funds from SVB, worsening the situation for the bank.
After more than a decade of relentless growth, the stock market capitalization of tech companies tumbled last year and they announced tens of thousands of layoffs.While higher interest rates are generally good for banks as they can earn more from lending, a lot depends on the rate they have to pay to acquire funds.
SVB shows that bank runs, the self-fulfilling panic by depositors to withdraw their cash in the fear that a bank will collapse, remain very much a threat in today's world despite bank regulation.
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