Silicon Valley Bank collapse reverberates in Israel, Gulf
Israeli startups had a lot of money in Silicon Valley Bank and may need the government’s help.
Silicon Valley Bank’s failure on Friday is already affecting the Middle East, particularly Israel and some Gulf states.
Background: Silicon Valley Bank, based in California, closed on Friday. The US government’s Federal Deposit Insurance Corporation placed the bank under “receivership” — a process whereby authorities seize a firm’s assets to help creditors recover funds in default.
The move followed Silicon Valley Bank experiencing significant financial difficulty that began with the US Federal Reserve aggressively raising interest rates in recent months to curb inflation. Investors, including those in Silicon Valley tech startups, became more risk averse as borrowing became more expensive.
Startups, which make up the bulk of Silicon Valley Bank's clients, began withdrawing funds last week, creating a capital shortage at the bank and leading to an all-out bank run. Customers withdrew a whopping $42 billion by the end of Thursday. On Friday, the bank tried to find a buyer but ultimately went under.
