FT News Briefing SVB’s cardinal sin
Mar 13, 2023
The dramatic collapse of Silicon Valley Bank has sent shockwaves through the tech industry, marking a significant regulatory crisis. The podcast examines the risky decisions that led to its downfall and the government's efforts to protect depositors without a bailout. Additionally, the rising trend of disposable vapes raises serious environmental concerns, with millions of devices contributing to electronic waste and showcasing poor recycling practices. The discussion also highlights the broader implications for stakeholders and new startups.
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SVB's Risky Bet
- SVB's vulnerability stemmed from decisions made during the pandemic's peak, locking up deposits in low-interest securities.
- This was a risky bet that interest rates would stay low, ultimately leading to its downfall.
SVB's Concentration Risk
- While many banks made similar investment choices, SVB's high concentration in the tech sector made it vulnerable.
- A diversified customer base would have mitigated the rapid "run on the bank" effect.
The $1.8 Billion Loss
- SVB's attempt to improve profitability by liquidating securities backfired, revealing its vulnerability.
- The resulting loss, though not fatal in itself, spooked investors and highlighted the bank's risky position.