Earlier this month, Silicon Valley Bank failed after depositors rushed to withdraw money amid anxiety over the bank's health. Silicon Valley Bank was known for lending against pre-initial public offering (IPO) securities, primarily issued by venture-backed companies. After California regulators closed the bank, the Federal Deposit Insurance Corporation (FDIC) took control, acting as a receiver to liquidate its assets and pay back its customers.
According to news sources, Silicon Valley Bank's future started to take a turn for the worse when it announced it sold securities at a loss and would sell $2.25 billion in new shares to shore up its balance sheet. This course of action triggered panic among venture capital firms, which then advised companies to withdraw their money from Silicon Valley Bank.
According to Mark Zandi, Moody's chief economist, the Federal Reserve's aggressive interest rate increases play a part in the bank's decline. Zandi shared that higher interest rates hit the tech industry especially hard, weakening the value of tech stocks and making it tough to raise funds.
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