'Old, boring, conservative bank': 3 reasons why Silicon Valley Bank collapsed

Silicon Valley Bank, a startup-focused lender in the US, became the largest bank to fail since the 2008 financial crisis. The sudden collapse of the California-based bank caused upheaval in global markets and left billions of dollars belonging to companies and investors stranded. At the end of last year, the Silicon Valley Bank ranked as the 16th biggest in the US, with about $209 billion in assets.

Deepak Shenoy, Capitalmind's Founder and CEO, shared his thoughts on the current state of Silicon Valley Bank on Saturday. He referred to it as an "old, boring, conservative bank" in a post on LinkedIn. However, he believes that the bank's current situation is not due to bad lending practices but rather a combination of three factors.

Firstly, Shenoy mentioned the bank's strange approach to investing short-term money, which he believes has led to a decline in its capital position. He pointed out that the bank has invested heavily in startups, which are known to have high-risk profiles, without considering the potential consequences of such investments.

Secondly, Shenoy highlighted the timing of the bank's announcement of a capital raise, which came shortly after the collapse of another bank. He suggested that the timing was inappropriate and could have caused panic among the bank's investors and clients.

Finally, Shenoy criticized the bank's response to the situation, stating that they had told people not to panic when they should have been more transparent about their situation. He believes that the lack of transparency only adds to the uncertainty surrounding the bank's future.

While the bank has been a pioneer in providing financial services to the tech industry, its recent financial performance has raised questions about its long-term viability. The combination of risky investments, poorly-timed announcements, and a lack of transparency has only added to the mess.

According to Reuters, in the last two days, US banks have experienced a loss of over $100 billion in stock market value, while European banks have lost around $50 billion in value.

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