Please enable JavaScript.
Coggle requires JavaScript to display documents.
Silicon Valley Bank Crisis - Coggle Diagram
Silicon Valley Bank Crisis
Context
Regulators had abruptly shut down Signature Bank to prevent a crisis in the broader banking system
Startup-focused lender SVB Financial Group became the largest bank to fail since the 2008 financial crisis
Founded in 1983, SVB has since become the go-to bank for startups and entrepreneurs in Silicon Valley and beyond
Why did it collapse?
Customers panicking
Bank’s Stock prices plummeted
A decline in bond prices
Regulators stepped in
Heavy investment in government bonds
Liquidity risk
Reasons for
SVB’s downfall
Mostly startup account holders
Drying VC funding
Lower bond yield due to lower interest rates
Fear over deposit insurance
A downturn of tech stocks
Is this a start of
a banking crisis?
Shares of bigger banks were not affected as much.
The failure of one would scare off customers of other banks
Most banks are unlikely to have significant liquidity risk.
Businesses can be more vulnerable to bank runs than larger peers
Implications
Huge uninsured deposits
Ripple effect
No scope for asset reconstruction
Startups scramble
Impact on
Indian startups
Forced to cut costs, delay projects, or lay off employees
Hamper the funding
Lost infrastructure support to set up operations
Uncertainty over deposits
India’s resilience
RBI FSB: Even under a severe stress scenario, the capital adequacy ratio of banks is likely to remain stable
Government is lending support
Indian banks are well-capitalised
Learnings from
it’s failure
Pause on its rate hike programme
RBI deserves credit for how it handles the Indian banking system
Question the Trump-era deregulation of banks: