SVB Financial Group, the parent of the company Silicon Valley Bank, filed for chapter 11 bankruptcy on the 10th of March. This happened a week after the bank was taken over by the Federal Deposit Insurance Corporation (FDIC), which was followed with a 36-hour surge of depositor withdrawals. The Silicon Valley Bank is a commercial bank whose main business model was to loan money into venture capital firms and private equity firms. Therefore, the bankruptcy of their parent company has “triggered the worst bank collapse since the financial crisis” (Helmore, 2023).
According to a statement submitted by the Chief Restructuring Officer of SVB Financial Group on the 12th of March, the company has encountered difficulties at the beginning of its Chapter 11 bankruptcy proceedings in the Manhattan bankruptcy court. The reason behind this is the lack of cooperation with the bridge bank responsible for assuming control of its operations.
SVB Financial filed for bankruptcy a day after Wall Street’s biggest banks announced a $30bn deal to prop up First Republic.
The FDIC is trying to sell SVB and might consider breaking up the bankrupt company, according to court documents. SVB Financial lost its main sources of revenue and much of its business infrastructure due to the FDIC's receivership, resulting in the company defaulting on its debts and ultimately going bankrupt. In its court filings, Silicon Valley Bank Financial reported $19 billion in assets, $2.2 billion in cash and cash equivalents, and $3.4 billion in liabilities.
The intention behind the action, which was coordinated with the US regulators, was to create a barrier that would shield First Republic and prevent the decline from affecting other banks of similar size.
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