US Bank was known for funding startups; had activities closed by the government on Friday (10.mar)
Nubank said it was not affected by the closure of SVB (Silion Valley Bank), which ended its activities on Friday (10.Mar.2023) and was known to finance startups.
The Brazilian bank released a note on Saturday (11.Mar.2023) to “clear up misinformation that he had investments in SVB.
Here is the full text of the bank note:
“In order to clear up misinformation circulating on social networks and whatsapp groups, Nubank informs that it has no exposure to Silicon Valley Bank.
On this date the same statement was issued to the market:
Nu Holdings Ltd. (“Nu Holdings”, “Nu” or the “Company”) communicates to its shareholders and the market that neither the Company nor any of its subsidiaries have any exposure to Silicon Valley Bank.”
O Power360 explains below what is known about the case and the risks to the market:
- foundation – 1983, during a poker game between Bill Biggerstaff and Robert Medearis;
- thirst – Santa Clara, California (United States);
- units – 17 in California and Massachusetts;
- size – was among the 20 largest American commercial banks, with US$ 175 billion (about R$ 900 billion) under management;
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- segment – provision of financial services for startups of technology;
- influence –participated in 44% of IPOs (initial stock offering) of technology and healthcare companies in 2022;
- division – on 4 networks:
- Silicon Valley Bank – global commercial bank;
- SVB Private – private banking and wealth management;
- SVB Securities – investment bank;
- SVB Capital – venture capital and credit investment;
- impact – It is the biggest failure of a US bank since the 2008 crisis.
REASON FOR BANKRUPTCY
The bank informed on Wednesday (March 8) which had paid off US$ 21 billion in securities (R$ 109 billion) with a loss of US$ 1.8 billion (R$ 9.9 billion) in the 1st quarter. In addition, it planned to sell US$ 1.7 billion (R$ 8.8 billion) in shares.
The result: there was a classic rush by customers to get their money out of the bank as quickly as possible.
It turns out that part of the withdrawn amount was invested in other, less liquid assets.
The Federal Reserve, the US central bank, loosened rules on the use of customer funds in March 2020, due to the pandemic, and financial institutions were able to spend 100% of what they received on deposits from account holders.
With the pandemic, demand for loans has dropped. So banks started buying assets with customer deposits. This is the case with SVB.
The institution was unable to meet withdrawal requests. Therefore, an intervention was necessary to avoid a case similar to the subprime crisis in 2008.
The entire small banking sector is under stress. Gavekal consultancy said, in reportthat Silicon Valley Banks is not an isolated case: but the 1st of a “Sorrow Battalion” that was yet to come.
The shares of First Republic Bank, famous for managing assets, have already lost 30% of market value in the last 2 days due to uncertainty regarding its financial health.
The S&P 500 index is down 11.5% over the past 5 days.
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