When people put their money into banks, they generally trust that these financial institutions will do the right thing and protect their funds. This is the entire premise and argument for bank usage in the first place.
More often than not, banks do get it right and make sure to protect their customers’ funds. However, when they fail to meet the mark, the consequences of this failure can be disastrous.
In the case of Silicon Valley Bank, it’s led to the institution being forcibly shuttered by US federal regulators.
Why Silicon Valley Bank is being shut down
Yesterday, the Federal Deposit Insurance Corporation (FDIC) revealed that with regulators shuttering Silicon Bank Valley, Santa Clara, California’s new Deposit Insurance National Bank will receive funds from the now disgraced institution.
The demise of Silicon Valley Bank largely comes as a result of the Federal Reserve increasing interest rates. After these interest rates grew, the bank saw its asset sales perform poorly.
Asset troubles eventually led to Silicon Valley Bank deciding upon a high volume of upcoming security sales. Individuals and companies with a lot to lose then subsequently started withdrawing their funds from the bank.
