Suddenly, everything happened very quickly: Within a few days, Silicon Valley Bank (SVB) lost the confidence of investors and customers, and on Friday the American Deposit Insurance Authority (FDIC) took control and closed the bank. Since then, many investors on the stock market and bank customers have been wondering whether a new financial crisis may be imminent. Here are answers to the most important questions:
What did Silicon Valley Bank do?
The institute, which has been active since 1983, has developed over the years into the "house bank of the tech industry". The SVB financed young emerging companies, the boom of the start-up scene made the bank one of the largest banks in the United States. According to media reports, the customers also included start-ups from Germany. According to the FDIC, the California-headquartered bank managed $209 billion in assets at the end of December and had about $175.4 billion in customer deposits.
Why did the bank get into trouble?
Exaggeratedly, one could probably say after what is known so far: The SVB had too much money and invested it unfavorably. In times of low interest rates, the bank invested in US government bonds as well as in long-term real estate-backed securities. But then the US Federal Reserve raised interest rates rapidly due to the sharp rise in inflation. Many securities acquired by SVB during the low-interest phase lost considerable value. At the same time, the SVB was apparently forced to offer investors higher interest rates so that they would not withdraw their deposits. With the sale of bonds, the SVB recently made a loss of 1.8 billion dollars. The attempt to raise fresh money from investors by issuing new shares caused further uncertainty. On Thursday alone, SVB shares fell by a good 60 percent on Wall Street.
Is Silicon Valley Bank active in Germany?
Since May 30, 2018, Silicon Valley Bank has had a branch in Germany and operates lending business from Frankfurt/Main. On Monday, financial regulator Bafin closed Silicon Valley Bank Germany Branch to customer traffic with immediate effect and issued a ban on sales and payments. At the same time, BaFin declared: "The plight of Silicon Valley Bank Germany Branch does not pose a threat to financial stability."
Is there a threat of a global financial crisis like 2008?
Many experts currently consider this to be rather unlikely. The problems of the SVB and other financial institutions bring back memories of the collapse of the investment bank Lehman Brothers, which is considered to trigger the global financial crisis about 15 years ago. However, there are important differences: Although SVB is not a small institution, it ranks 16th among all American banks in terms of total assets. However, the SVB is nowhere near as big as Lehman Brothers was in 2008. In addition, SVB is a financial institution specialising in venture capital and start-ups in the technology sector, whereas Lehman has been much more important to the financial system.