COLLAPSE OF SILICON VALLEY BANK AND ITS IMPACT ON THE US ECONOMY


 

Silicon Valley Bank, also known as SVB Bank was one of the biggest and most popular state-chartered banks which was founded in the year 1983 by Wells Fargo. The bank had its headquarters in Santa Clara, California. The bank had its branches in California as well as Massachusetts. SVB offered a plethora of services that were able to fulfill the needs and demands of the tech-based industry and related countries. Due to its exceptional services, the Silicon Valley Bank became the top choice of every tech company in the United States, and slowly and gradually this bank became the most loved and trusted choice for more than half of tech-based companies and startups.

When the SVB got collapsed on 10th March 2023, it was the 16th largest commercial bank in the United States. Big and popular companies such as Airbnb, Block, and Pinterest were the present clients of this bank.

WHY DID THE SILICON VALLEY BANK COLLAPSED ON 10TH MARCH 2023?

The only reason behind this massive collapse which led to technology-based startups in shock was the hike in the interest rates which was done by the US central bank, US Federal Reserve. As the interest rates went up, various investors started withdrawing their funds from the bank to get over their cash crunch.

As many investors withdrew their funds from the bank, as a result, SVB sold its bond portfolio at a huge loss and started a stock sale. This tactic of the bank went in vain as no one showed interest in this scheme and finally, the bank was pushed into receivership.

In short, the investment strategy of the bank was a failure as it invested money in some long-term treasuries when the interest rates were low. As these rates went up, the bank was not able to meet the market expectations and collapsed on 10th March 2023.

 

 

IMPACT OF THIS COLLAPSE ON THE US ECONOMY

·     First, the small startups and companies that had their funds invested in the Silicon Valley Bank would be directly affected. That means the technological advancement and innovation sector is hit hard due to this event.

·     As per the forecasts, a financial crisis can come into play in the technological industry. As there would be a shortage of funds in the tech industry, economic slowdown and downfall of US Trade Data can also happen.

·   We all know that technology is the backbone of every sector. So, if the tech-based companies and startups would get hurt, this would directly affect the broader economy also like the real estate, retail, or manufacturing sector.

·    Now, if all the sectors would get a negative impact, the US Export Data would also decline due to the non-availability of products like automobiles, machines, and electric appliances.

·     It is forecasted that US Import Data would rise to fulfill the demands and needs of the technological industry.

·      Not only the United States, but the global economy would feel the effect of this historical bank collapse as many big MNCs, and industries had their stake invested in SVB. As SVB was the primary source of funding and providing seed investment to new tech startups, now its absence will be surely felt.


 CONCLUSION

As we reach the end of this blog, we would only like to say that for some time now, the technological advancements and innovations that were happening across the globe would decline due to the non-availability of funds and investments. If you want to stay in touch with all the new insights and updates on this matter, then keep visiting our website.

Also, if you are interested to get the US Trade Data or customized reports for the United States, then feel free to contact us via direct call or email. We would be happy to assist you and solve your queries.

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