SVB Financial Group, the parent company of Silicon Valley Bank, has filed for court-supervised reorganization under Chapter 11 bankruptcy protection. The move comes after Californian regulators shut down Silicon Valley Bank, the tech lender’s former unit, last week, making it the largest collapse since the financial crisis of 2008. In an effort to shore up confidence, emergency measures have been put in place, but concerns over financial contagion persist. The defunct lender attempted to raise $2.25 billion in common equity and preferred convertible stock to offset a $1.8 billion loss from selling a portfolio of treasuries and mortgage-backed securities to Goldman Sachs. However, clients withdrew deposits, leading to $42 billion of outflows in a day.
SVB Financial Group’s bankruptcy filing seeks buyers for its assets, and the company has stated that its other assets and investments will also be evaluated for alternatives. While SVB Securities and SVB Capital’s funds and general partner entities are not included in the Chapter 11 filing, the parent company plans to proceed with evaluating alternatives for those businesses.
The news has had a significant impact on the U.S. banking industry, with shares of big banks falling between 1.5% and 2% in premarket trading on Friday. SVB Financial Group has about $2.2 billion in liquidity and had $209 billion in assets at the end of last year. The company’s decision to seek bankruptcy protection comes amid growing concerns about the stability of the financial system and the potential for further contagion.