SVB Bank's parent company has filed for bankruptcy protection.

SVB Financial Group (the parent company of Silicon Valley Bank (SVB)) announced on March 17 that it has filed for a reorganization under Chapter 11 of the US Bankruptcy Code to seek a buyer for its assets.

The decision to file for bankruptcy protection was made after SVB was taken over by US regulators, and emergency measures aimed at restoring customer and investor confidence did not yield the desired results.

In a petition filed in New York, SVB Financial Group listed assets and liabilities, each totaling $10 billion.

World - SVB Bank's parent company files for bankruptcy protection. — Customers wait in line at a branch of Silicon Valley Bank (SVB) in Massachusetts, USA, on March 13. Photo: timeforkids.com

Silicon Valley Bank is a chartered commercial bank in California and part of the Federal Reserve system, so it is not eligible for bankruptcy. Instead, it was taken over by the Federal Deposit Insurance Corporation (FDIC).

Meanwhile, SVB Financial is eligible to file for protection of its remaining assets and work to repay its creditors, including bondholders.

According to a statement, brokerage firm SVB Securities and venture capital firm SVB Capital were also not included in the filing.

Following the acceptance of the filing, SVB Financial Group is no longer affiliated with Silicon Valley Bank or SVB Private (the group's asset management and private banking business), SVB Financial stated.

As of the morning of March 8th, SVB Bank was still a well-capitalized institution seeking to raise funds. The situation began to deteriorate rapidly when, later that day, SVB's parent company, SVB Financial, announced it had sold a large amount of mortgage-backed securities to Goldman Sachs at a loss of $1.8 billion.

To close that gap, the corporation attempted to raise $2.25 billion in common stock and convertible preferred stock. However, this caused panic among major venture capital funds, who advised businesses to withdraw their money from SVB. On March 9th, SVB customers withdrew $42 billion in deposits – approximately one-quarter of the bank's total funds.

A day later, California regulators closed SVB and designated the Federal Deposit Insurance Corporation (FDIC) as its takeover, making it the biggest bank failure since Washington Mutual's bankruptcy during the 2008 financial crisis.

SVB Financial, along with its CEO and CFO, has been sued in a class-action lawsuit for failing to disclose the risks that future interest rate increases could pose to its business operations.

Nguyen Tuyet (Based on CNN, Reuters, Bloomberg)

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