Explained: What is Silicon Valley Bank Crush and its Impact on Dalal Street?

The sudden shutdown of Silvergate Capital Corp and ill-considered fundraising by Silicon Valley Bank (SVB) have raised serious concerns in the US startup ecosystem. Little known outside of Silicon Valley, the investor sparked a wave of panic across the tech industry. Bonds at SVB Financial Group fell in tandem with its shares after the company took steps to shore up capital following losses in its securities portfolio and a slowdown in funding.

What is the SVB crisis?

The SVB Financial Group operates one of the largest American commercial banks – the Silicon Valley Bank. On Wednesday, it announced a $1.75 billion stock sale program to further strengthen its balance sheet. This program triggered a massive sell-off in the group’s shares.

After that, the market turned sharply bearish and the bear rage wiped out over $80 billion of its market value. Alongside this, the group’s bond prices plummeted, causing panic in the market.

What is SVB business?

Silicon Valley Bank is one of the oldest and largest banks in the Valley, primarily focused on lending to technology companies and providing various services to venture capital and private equity companies investing in technology and biotechnology. It is also involved in private banking services for high net worth individuals. In addition to the lending business, the bank operates the areas of venture capital and private equity.

How does the SVB deal with the issue? Greg Becker, CEO of SVB, conducted a conference call with SVB’s clients and venture capital investors in the bank. Becker has urged investors to “keep calm” in hopes of not being faced with more withdrawals.

In a letter to several shareholders on Wednesday, he explained, “We are taking these actions because we expect continued higher interest rates, pressure on public and private markets and increased cash burn from our clients investing in their companies.”

Is It A Problem For The Indian Stock Market – Impact On Dalal Street?

The sell-off in SVB stock and the US market also impacted the Indian stock market and there was a spillover effect on Dalal Street and bank stocks fell today as investors worried about loan defaults in a rising interest rate environment. However, the positive news for investors is that market experts see no impact of the SVB crisis on India or the domestic banking system.