SVB bank run update and stocks downtrend globally

February 12, 2024


Following our report on the recent collapse of Silicon Valley Bank (SVB), Signature Bank also felt just two days later, potentially indicating another financial panic. Read the full update here.

Following our report on the recent collapse of Silicon Valley Bank (SVB), Signature Bank also felt just two days later, potentially indicating another financial panic.

Banks in US and Europe struggle mark the latest sign of fallout. On Tuesday, March 14th, The Justice Department and the Securities and Exchange Commission started an investigation due to the fall of SVB.

On Wednesday, chaos in the banking industry caused US and European stocks to plunge as fears of damage to the financial system increased, followed by the downfall of SVB, the largest bank failure since 2008. Uncertainty looms over the future direction of central banks' interest rate moves and the value of industry bond portfolios.

This week's overview after the SVB bank run:
  • European stocks slumped, closing down 3%.
  • The US S&P 500 fell 1.9%, while the Nasdaq fell 0.9%.
  • There are concerns about corporate bonds with the gap between yields on junk-rated debt and US treasuries.

The US Federal Reserve continues balancing the downfall of three US banks. Investors remain cautious as this uncertainty and speculation might force central banks to change interest rate plans to combat inflation.

In an isolated case, the Euro Stoxx Bank index dropped after the situation with Credit Suisse. The fall comes after Credit Suisse's largest shareholder said it would not inject any more capital. Credit Suisse plans to borrow $50bn Swiss Francs ($53.7 billion) from the Swiss Central Bank, hours after the Central Bank announced it was willing to provide financial support after shares in the country crashed.

Credit Suisse's shares slightly increased in value on Thursday morning, following confirmation by the Swiss Central Bank that it will provide liquidity to Credit Suisse as requested against sufficient collateral.

On Thursday morning, bank stocks in Asia also fell, as Credit Suisse fears that banking turmoil is spreading into other regions worldwide.

The European Central Bank will meet on Thursday to decide on the next steps for interest rates. Investors are speculating whether it'll be a 25 or 50 basis points rise.

In contrast to traditional banks, Bitcoin has seen a different trend and experienced a slight increase after the fall of SVB.

In Latin America, the market also sees a fall, with banks such as Bancolombia, Santander, and others experiencing a downtrend. Many startups have responded quickly to the collapse, withdrawing their funds from SVB and taking advantage of loans from different fintech and neobanks, while some others are still struggling with getting their funds back.

What's going to happen with Fintechs and neobanks after the SVB collapse:

Startups considered SVB one of the most startup-friendly bank to store their funds. Traditional banks are often more risk-averse, with more rigorous due diligence processes.

Neobanks are now reporting a windfall of new clients in the wake of the Silicon Valley Bank collapse.

Fintechs and neobanks are also extending their lines of credit and responding fast to the startups impacted by this situation. It is clear that for startups and small businesses, diversifying their financial providers will be key to ensuring financial stability in the coming months.

On the other hand, the SVB intervention brings Fintechs and neobanks under closer scrutiny for tighter regulations.

Takeaways from these days:
    Only hire when it hurts. This situation affects investment in tech startups, as we all know. If you can run lean operations, do it. Make a plan to surpass hard times and cut operational costs. See where you can spend less and try to stick to it for some time.Find alternatives and diversify your financial providers. Don't keep your capital and funds in one place.FOCUS, FOCUS, FOCUS on things that are working. Great companies focus on one source of income instead of trying to build too much.As markets continue to be volatile, funds and founders will have to pay close attention to the potential risks. In any case, investors will continue with their long-term vision to diversify their portfolio and invest in sustainable & scalable businesses.Become more obsessed with your metrics. Try to be sustainable before raising too much capital.Challenges bring innovation opportunities. The last time something like this happened, Bitcoin emerged; what will happen this time? Will new solutions surface to solve today's challenges faced by tech startups and many others struggling with capital?

We have witnessed an even more united startup ecosystem that is rapidly responding to the ongoing events. It is still too early on the stock's downtrend; we will monitor how the situation will unfold. One thing is certain: tighter regulations today make it harder for the entire market to collapse as it did in 2008. We remain hopeful that VCs and funds will stick to their long-term strategy and continue investing in sustainable startups.

We will continue supporting startups through our pre-seed startup acceleration program to make sure they have a solid fundraising strategy and a sustainable business before raising capital.