Financial Technology
The Tech World Is Shaken By The Fall Of Silicon Valley Bank!
Updated on Tue, Mar 14, 2023
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Over the weekend, panic had already set in, with executives at thousands of AI startups concerned about their deposits in SVB. Silicon Valley Bank lends money to startups and keeps their cash deposits, allowing them to pay staff and other expenses.
On Thursday, depositors tried withdrawing $42 billion from the bank which equaled nearly $500,000 a second over a 24-hour period. This led to its shutdown by regulators and takeover by the Federal Deposit Insurance Corporation (FDIC).
This collapse was the fastest in history, according to Tom Vartanian, author of "200 Years of American Financial Panics." Social media fueled the panic, mainly Twitter, with "SVB" tweeted roughly 200,000 times on Thursday. Even tech luminaries, the people SVB banked for so many years, couldn't help themselves. Anxiety quickly escalated and several founders and CEOs of tech companies even posted about pulling money from the bank.
The same report says, Siqui Chen, founder and CEO of Runway, a financial software startup, deleted some of his tweets about SVB, admitting on Monday that "fanning the flames of a bank run is a bad look for everybody, and I don't want to be a contributor."
On the other hand, according to The Information, SVB CEO Gregory Becker told clients on a Thursday call to “stay calm” and that there's no need to worry. He added that the bank has "ample liquidity to support our clients with one exception: If everyone is telling each other SVB is in trouble, that would be a challenge." Besides, some founders who bank with SVB say they're still deciding.
This event has shocked the banking industry, regulators and most other experts. It has taught us that technology is obsoleting the current regulatory structure built in the 1930s, according to Vartanian. The whole system needs to be looked at differently in a tech-adroit environment.
In a nutshell, the fall of Silicon Valley Bank has sent shockwaves through the tech industry and highlighted the need for a better regulatory structure to keep pace in the quick-moving tech world. Do you think the panic was actually fuelled by social media, specifically Twitter? Did it show the power and speed of communication in the digital age?
Feel free to pitch your thoughts in the comments section below.
First published on Tue, Mar 14, 2023
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