Why Silicon Valley Bank collapsed?
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- Опубликовано: 21 авг 2024
- #YOUCANLEARNECONOMICS
#ECONOMICS
Silicon valley bank collapse came suddenly, following a frenetic 48 hours during which customers yanked deposits from the lender in a classic run on the bank.
But the root of its demise goes back several years. Like many other banks, SVB ploughed billions into US government bonds during the era of near-zero interest rates. What seemed like a safe bet quickly came unstuck as the Federal Reserve hiked interest rates aggressively to tame inflation.
When interest rates rise, bond prices fall, so the jump in rates eroded the value of SVB’s bond portfolio. The portfolio was yielding an average 1.79% return last week, far below the 10-year Treasury yield of around 3.9%, Reuters reported.
At the same time, the Fed’s hiking spree sent borrowing costs higher, meaning tech startups had to channel more cash towards repaying debt. At the same time, they were struggling to raise new venture capital funding.
That forced companies to draw down on deposits held by SVB to fund their operations and growth. While SVB’s problems can be traced back to its earlier investment decisions, the run on the bank was triggered Wednesday when the lender announced that it had sold a bunch of securities at a loss and would sell $2.25 billion in new shares to plug the hole in its finances.
That set off panic among customers, who withdrew their money in large numbers. The bank’s stock plummeted 60% Thursday and dragged other bank shares down with it as investors began to fear a repeat of the global financial crisis a decade and a half ago. By Friday morning, trading in SVB shares was halted, and it had abandoned efforts to raise capital or find a buyer. California regulators intervened, shutting the bank down and placing it in receivership under the Federal Deposit Insurance Corporation, which typically means liquidating the bank’s assets to pay back depositors and creditors.
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Sir I am your fan
Your way of teaching is very superior
So charitable on your part Utkal ji. Will try to live up to the expectations.
🙏🙏 thanks sir
Most welcome
Thanks sir ji🙏😊
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Thank u so much ❤❤ sir
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Very easy explanation given sir, please take long live sessions on Sundays.
I will try my best
Thank you so much Sir
Most welcome
Thank you so much for making this video sir, since last 3-4 days i was reading in the newspaper about the news of Sillicon valley bank crash & suisse credit. And it's a kind of treat you have given to economics student like us by making such video on this topic.
Sir you have explained each and every aspect of this issue in very lucid and succinct way.
But sir i have request to you please make and post video more frequently it's been more than 2 months have gone but you didn't upload any video. Please try to put lecture on more regular basis sir.
19/03/2023 sunday 12:18AM
Thank you Nilesh for liking my videos. I realise that my viewers must be disappointed for the prolonged delays in posting videos. It was due to multiple factors that were beyond my control. Now I hope to be a bit regular.
@@EZClassesfaghsa thank you sir for the response waiting for the next video sir.
19/03/2023 Sunday 10:18AM
Thanks sir
Sir g if you have time plz make a video on stock exchange. thank you.
Malak Humayun sb, Stock exchange and its dynamics is not my core competence but still if I could gather enough material I will try to do it.
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Sir namaste 🙏🙏🙏 aapko dekhkar accha lga
Dhannyawad Naveen ji.
Shark tank kyu achha nhi hai?
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