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How far away is Silicon Valley Bank?

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How far away is Silicon Valley Bank?

no On the one hand, Silicon Valley Bank’s problems are unique, as they are related to its special role as a start-up financier. “The risk of such a business model is very high,” says expert Brühl. Because many of the young companies are not yet making any money and are therefore more likely than established companies to run into problems when sources of money dry up. “That’s why most other banks don’t finance start-ups,” says Brühl.

On the other hand, the problems of the Silicon Valley Bank are a reminder that the sharp rise in interest rates is not only positive for financial institutions. Apparently, this actually trivial finding surprised a number of investors: in the past few months, they have bought large numbers of bank stocks because rising interest rates will lead to higher income for banks in the medium and long term. However, they had ignored short-term problems in their spending spree – and now want to part with bank stocks all the more quickly.

In addition, the problems at the Silicon Valley Bank could be an indicator of a deteriorating US economy that would affect all banks. Difficulties in the start-up sector could weigh on the American economy, which could lead to more bankruptcies in other sectors as well.

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