Silicon Valley Bank (SVB) was one of the largest and most influential banks in the United States, especially for the technology sector. It had more than $100 billion in assets and served over 30,000 clients, including start-ups, venture capitalists, private equity firms and corporations. It was also a major player in global markets, with offices in 15 countries.
However, on March 10, 2023, SVB collapsed after a bank run that drained its liquidity and eroded its capital base. It was taken over by the Federal Deposit Insurance Corporation (FDIC), which sold its assets and liabilities to JPMorgan Chase for $2.5 billion. The failure of SVB was the second-largest bank failure in U.S. history and the largest since the 2008 financial crisis.
How did SVB go from being a successful and respected bank to a bankrupt institution in a matter of days? Here is a timeline of events that led to its downfall:
- February 28: SVB reports its fourth-quarter earnings for 2022. It posts a net loss of $1.2 billion, mainly due to loan losses and write-downs related to its exposure to several troubled tech companies, such as Theranos, WeWork and Uber. It also reveals that it has received subpoenas from the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) regarding its accounting practices and lending standards.
- March 1: Moody's downgrades SVB's credit rating to junk status, citing its deteriorating asset quality, weak capital position and regulatory investigations. It warns that SVB may need to raise additional capital or sell some of its businesses to restore its financial health.
- March 3: The Wall Street Journal publishes an investigative report that alleges that SVB engaged in fraud and misconduct in its lending operations. It claims that SVB inflated the valuations of some of its tech borrowers, falsified their financial statements and colluded with them to hide their losses. It also accuses SVB of bribing some regulators and auditors to overlook its violations.
- March 4: The FDIC issues a cease-and-desist order against SVB, requiring it to stop making new loans until it improves its risk management practices and internal controls. It also orders SVB to submit a plan within 30 days on how it will raise at least $10 billion in capital or find a merger partner.
- March 6: Several large depositors withdraw their funds from SVB amid growing concerns about its solvency and reputation. These include some prominent tech companies such as Google, Facebook and Amazon, as well as some institutional investors such as BlackRock, Vanguard and Fidelity. The bank run accelerates as more customers lose confidence in SVB's ability to honor its obligations.
- March 7: SVB announces that it is exploring strategic alternatives to address its liquidity crisis, including selling some of its assets or businesses or seeking a merger with another bank. It says that it has hired Goldman Sachs as its financial advisor and Sullivan & Cromwell as its legal counsel.
- March 8: Bloomberg reports that JPMorgan Chase is interested in buying some or all of SVB's assets at a steep discount. However, it says that JPMorgan is facing regulatory hurdles due to antitrust concerns and potential legal liabilities stemming from SVB's scandals.
- March 9: The Federal Reserve announces that it will provide emergency funding to SVB through its discount window facility until it finds a buyer or stabilizes itself. However, it says that this is only a temporary measure and not an endorsement of SVB's viability or soundness.
- March 10: Despite receiving support from the Fed, SVB was unable to stop the outflow of deposits, leading to a severe cash crunch that jeopardized its operations and solvency. As a result, the FDIC declared SVB insolvent and took over its management and assets. The FDIC then sold these assets to JPMorgan Chase in an all-cash deal worth $2.5 billion, which covered all of SVB's deposits and most of its loans.
The collapse of Silicon Valley Bank marks one of the biggest shocks for the U.S banking system since the global financial