SVB Financial Group Inc’s shutdown and takeover by banking regulators on Friday can be traced to the U.S. Federal Reserve raising rates of interest and souring the danger hunger of financiers. Here is the series of occasions that caused Silicon Valley Bank’s failure: FEDERAL RESERVE RAISES RATES The Federal Reserve has actually been raising rate of interest from their record-low levels because in 2015 in its quote to combat inflation. Financiers have less hunger for danger when the cash readily available to them ends up being pricey due to the greater rates. This weighed on innovation start-ups – the main customers of Silicon Valley Bank – due to the fact that it made their financiers more risk-averse. SOME SILICON VALLEY BANK CLIENTS FACE CASH CRUNCH As greater rate of interest triggered the marketplace for going publics to close down for lots of start-ups and made personal fundraising more pricey, some Silicon Valley Bank customers began pulling cash out to fulfill their liquidity requires. This culminated in Silicon Valley Bank searching for methods today to satisfy its consumers’ withdrawals. SILICON VALLEY BANK SELLS BOND PORTFOLIO AT A LOSS To money the redemptions, Silicon Valley Bank offered on Wednesday a $21 billion bond portfolio consisting primarily of U.S. Treasuries. The portfolio was yielding it a typical 1.79%, far listed below the existing 10-year Tr
Find out more
