What caused Silicon Valley Bank’s failure?
NEW YORK — SVB Financial Group Inc’s shutdown and takeover by banking regulators on Friday can be traced to the U.S. Federal Reserve raising interest rates and souring the risk appetite of investors.
Here is the sequence of events that led to Silicon Valley Bank’s failure:
FEDERAL RESERVE RAISES RATES
The Federal Reserve has been raising interest rates from their record-low levels since last year in its bid to fight inflation. Investors have less appetite for risk when the money available to them becomes expensive due to the higher rates. This weighed on technology startups – the primary clients of Silicon Valley Bank – because it made their investors more risk-averse.
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