The massive 60 per cent crash in Silicon Valley Bank stocks has stunned investors after the lender's bid to raise funds triggered a sell off. The bank staring at a $2 billion loss because of deposits dropping lower than expectations, has also dragged down the entire banking sector. Apart from top four US banks losing $52 billion, ripples caused by the collapse also triggered a 600 point plunge for Sensex.
Fundraiser off the cards, bank up for sale?
Due to its impact on the entire sector, trading for the lender's stocks has been halted to prevent a collapse that can trigger a crisis. Silicon Valley Bank's staff has also been asked to work from home, as the lender is now looking for a buyer for the entire firm, instead of raising funds through share sale.
Uday Kotak blames interest rate hikes
Reacting to the event, which is being compared to the Lehmann brothers collapse due to global repurcussions, banker Uday Kotak has called it a disaster waiting to happen. He blamed the interest rates in the US going up by 500 basis points in a year for the fate of SVB, and added that analysts and investors underestimate the importance of a bank.
SVB has partnerships with almost 50 per cent of tech and healthcare firms of the US, and there are concerns over its ability to return money to all customers if a large amount of deposits are pulled out at once.
