This article is written by Emad Iqbal

The 2nd major banking crisis in the United States shook the markets around the world. SVB, Silicone Valley Bank is the 16th largest bank in the United States and recently it was shut down and was taken over by the US FED. So, what leads the bank to collapse? Keep reading to find out more.

How Did The SVB Attracted Lots of Deposit?

As we all are aware that during Pandemic, the US government decided to waive off the interest rates completely.

SVB, or Silicon Valley Bank, has been able to attract a large amount of deposits by focusing on serving the technology and innovation sector, which includes startups, venture capitalists, and other companies in the technology industry. Here are some of the key factors that have helped SVB attract lots of deposits:

-Niche Market: SVB focuses on a specific niche market of technology and innovation companies, which has helped it develop expertise in this area and establish a strong reputation within the industry.

-Banking Services: SVB offers a range of banking services that cater to the needs of technology companies, including loans, deposit accounts, and cash management solutions.

-Personalized Service: SVB provides personalized service to its clients, which has helped build strong relationships and loyalty with its customers.

-Innovation: SVB is known for its innovative approach to banking, which includes developing new products and services to meet the evolving needs of its clients.

Strong Brand: SVB has established a strong brand within the technology and innovation sector, which has helped it attract new customers and retain existing ones.

Overall, SVB’s focus on serving the technology and innovation sector, its personalized service, and innovative approach to banking have been key factors in attracting lots of deposits.

The Explainer Into SVB Crisis

In 2020, Silicon Valley Bank (SVB) faced a crisis when several of its clients, mainly startups and venture capitalists, experienced financial difficulties due to the COVID-19 pandemic. The crisis had a significant impact on SVB, which has been a prominent player in the technology and innovation sector.

One of the main issues that SVB faced during the crisis was the high level of loan defaults by its clients. Many startups and venture capitalists were unable to meet their financial obligations due to the pandemic’s economic impact. This led to a significant increase in loan delinquencies and write-offs, which had a significant impact on SVB’s balance sheet.

Another issue that SVB faced was the decline in deposit growth. The uncertainty caused by the pandemic led many of SVB’s clients to withdraw their deposits or keep them in reserve, leading to a decline in the bank’s deposit base.

To address the crisis, SVB took several steps to manage its risk and preserve its capital. The bank increased its loan loss provisions to cover potential losses from loan defaults and write-offs. It also implemented cost-cutting measures to reduce expenses and improve profitability.

SVB also worked closely with its clients to help them navigate the crisis. The bank provided loan extensions, interest rate reductions, and other forms of financial support to its clients to help them manage their cash flow and survive the pandemic.

Despite the challenges, SVB was able to weather the crisis and emerge in a strong position. The bank’s focus on serving the technology and innovation sector, along with its strong relationships with its clients, helped it navigate the crisis successfully.

Conclusion

In conclusion, the crisis faced by SVB in 2020 was a significant challenge for the bank, but it was able to manage its risks and emerge in a strong position. The bank’s focus on serving the technology and innovation sector, along with its commitment to its clients, played a crucial role in helping it navigate the crisis successfully.