The Silicon Valley Bank was once a largely successful company that provided banking and financing services for tech-related businesses and entrepreneurs. With the 2020’s pandemic-driven demand increase for digital services and electronics, many companies utilized SVB’s services such as payroll in order to hold their cash for business expenses. Subsequently, as banks typically do, the SVB invested many of these deposits. Most of these went towards government bonds, a debt-based investment where you loan money to the government to support its public spending funds–and one of the safest investments one can make. Unfortunately for the SVB, government bonds and interest rates have an inverse relationship–meaning when COVID-19 struck, the skyrocketing inflation rates led the government to raise interest rates, consequently decreasing the value of SVB’s bond portfolio. Moreover, the general decline in economic conditions critically affected tech companies and drove them to withdraw from their deposits. SVD didn’t have enough cash in hand and had no choice but to sell some of its bonds with big losses. Upon hearing this news, businesses started to line up in order to withdraw their money. Within 48 hours, the bank collapsed.

Its collapse has had an immediate and far-reaching impact on the financial services it provides to its clients. Renowned technology companies that relied on SVB for essential financial services such as lending, cash management, and investment banking, are now struggling to find comparable alternatives, especially in the short term. Furthermore, as SVB played a critical role in financing innovative and high-growth technology companies, its failure has added challenges for these companies in securing the necessary financing to continue their innovation and growth. Given SVB's significant presence in the banking industry and its relationships with banks and financial institutions worldwide, its failure has reverberated on a global scale. The failure of SVB has led to the loss of confidence in the United States' ability to maintain its leadership in technology and finance. This raises questions amongst companies and governments about whether the U.S. is capable of sustaining its worldwide influence.

Moreover, the SVB had been the base of half of U.S. venture-backed technology and healthcare companies, meaning that the fall of SVB is the same as numerous companies losing base financial sources to rent, invest and manage money. The finances of these companies have become unstable as they have to find an alternative service in the short term to secure their finances, which is very challenging. Moreover, SVB, as one of the biggest banks, had relationships with diverse banks and institutions, even governments globally, not only in the U.S.. As SVB was one of the main banks of the U.S.A, the fall of SVB led to lower confidence and trust in U.S. financial services internationally. Now, most companies are mainly focusing on other services than the U.S., while having the same struggle of finding a secure alternative financial service. Like this, the fall of SVB is causing a significant effect on the global economy, making it unstable and bringing challenges, especially in the area of financial security. Through a more political lens, now, in a time of particular political turmoil, people from all related professions, including but not limited to lawmakers, financial analysts, and political experts, are asserting their opinions on what policy responses must be made. The “blame game” has started as politicians are seeking to place blame on opposing parties and hold them responsible for a possible banking crisis. The Democrats are blaming the previous Trump administration for a 2018 deregulation which cleared grounds for bank failures; the Republicans, in particular Mr. DeSantis, the Governor of Florida, are calling SVB a “woke” bank, suggesting that their failure derived from their diversity, equity, and inclusion initiatives which distracted them, which ultimately lead to their collapse. The Federal Reserve is receiving criticism over the collapse of the SVB on why the central bank failed to stop the SVB from taking obviously dangerous risks. Regulators and lawmakers are calling into question how the central bank should oversee financial institutions. Meanwhile, the Biden administration has announced their intervention in the situation to avert a banking crisis and has assured SVB customers that all of their deposits, not just the amount covered by the FDIC, will be protected.

Not only that, it could have a substantial impact on U.S. businesses as well, specifically the diversity of it. The loss of the bank will create a profound gap as founders of color are already far less likely to receive VC funding and small business loans. The tech industry will return to operations completely changed, with companies and VCs actively diversifying their assets and using multiple banking partners. The collapse of SVB will alter how VCs conduct due diligence, and startups will find it hard to take the risk of using a regional bank, which may lead to a shift towards larger banks. Since SVB has beneficially contributed to the growth of technology and was one of the biggest banks in the U.S. before, the causation of SVB's collapse can be questionable. Several years before now, SVB had invested billions of dollars in the government, when the interest rates were nearly zero. This was where everything started: the interest rates started to rise under the control of the Federal Reserve. As the interest rates were rising, the bond prices had fallen, and therefore, this impacted SVB’s bond portfolio to corrode its value. Since the SVB’s collapse, this has impacted other business developments. In the case of small banks, it is estimated that the small banks have lost at least 108 billion dollars in total. Moreover, the technology development and industries in the U.S., to which SVB was known for their large contribution, were negatively impacted by this incident: the U.S. losing trust in the maintenance of leadership in the technology field. Thus, the unexpected collapse of SVB has caused confusion in the U.S. business development, such as small banks, and technology fields (including finance).

However, it's important to remember that the tech industry is notoriously resilient, and we've seen it bounce back from major setbacks before, such as the dot-com crash of the early 2000s. It's possible that new players could emerge to fill the void left by the Silicon Valley Bank, or existing financial institutions could step up to provide similar services.