Silicon Valley Bank collapses, sparks global financial rout

MUMBAI: Silicon Valley Bank, a four-decade old US lender, collapsed into Federal Deposit Insurance Corporation (FDIC) receivership on Friday, after its long-established customer base of technology startups grew worried and yanked deposits. Receivership typically means a bank's deposits will be assumed by another, healthy bank or the FDIC will pay depositors up to the $250,000 insured limit

California banking regulators will dispose of its assets, moving quickly to protect depositors as a crisis rippled through global markets and hit banking stocks. The bank had $209 billion in assets and $175 billion in deposits as the time of failure, the FDIC said in a statement.

The liquidity issue at Santa Clara-based SVB came to light on Thursday night, following which its stock price crashed by more than half and by another 69% in pre-market trades on Friday. The bank faced a run following which its stock hit a seven-year low and trading was suspended.

The impact of troubles at SVB spread quickly across the globe, leading to a crash in financials on both sides of the Atlantic and wiping off hundreds of billions of dollars, market data showed. Investors globally are also keeping their fingers crossed after US treasury secretary Janet Yellen on Friday indicated that SVB was not the only lender that was facing challenges.

On Friday, the impact of SVB's troubles were felt on Dalal Street too. As investors pressed the sell button, the sensex fell by over 900 points in early trades but some bottom fishing helped it close at 59,135, down 671 points or 1.1% on the day. Like their global counterparts, in India too banking & financial stocks led the slide with BSE's banking sector and financial services indices closing around 1.8% down.

Rising expectations of a 50-basis-point (100bps = 1 percentage point) hike in rate of interest in the US later this month, which could affect foreign investors' interest for emerging market stocks including in India, also had a negative impact on investor sentiment, market players said. On BSE, among the sensex constituents, the top six losers for the day were all from the BFSI sector: HDFC Bank, HDFC, SBI, IndusInd Bank, Axis Bank and Bajaj Finserve.

Retail investors, meanwhile, continued to put money in the stock market through the MF route even as debt fund investors remained cautious as interest rates stayed at an elevated level. The monthly flows through SIPs in February showed a marginal drop compared to the January figure, but industry players attributed that to the shorter month. In February, equity mutual fund schemes together recorded a net inflow of Rs 15,686 crore, compared to Rs 7,303 crore in December 2022, AMFI said.


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