Silicon Valley Banks’ Uncovered Deposits Prompt Discounted Sales

03/12/2023 15:55 • AI & Tech Insights • 71 views

On March 12, according to the Financial Times, some depositors of Silicon Valley banks are trying to sell their deposits at a large discount to raise cash. According to the data of Cherokee Acquisition, the quotation of bank deposits in Silicon Valley that are not covered by insurance is between 55% and 65% on the 10th. According to the report, for some start-ups, it is their last resort to sell their deposits at a discount in order to pay their employees’ wages. A number of VCs said that they had contacted some start-ups and hoped to buy their deposits at a certain discount. Data shows that by the end of 2022, 96% of deposits in Silicon Valley banks were not covered by the Federal Deposit Insurance Corporation (FDIC). (CCTV Finance)

Some Silicon Valley bank depositors seek to sell deposits at a discount

Analysis based on this information:

The news from CCTV Finance reveals an alarming trend of some depositors of Silicon Valley banks trying to sell their deposits at a large discount to raise cash. These deposits are not covered by insurance, and according to Cherokee Acquisition’s data, their quotation ranges between 55% and 65% as of the 10th of March. It is reported that for some start-ups, selling these deposits at a discount is their last resort to pay their employees’ wages. This worrying situation has drawn the attention of a number of VCs who hope to buy these deposits at a reduced price.

One of the key reasons for this situation is the lack of insurance coverage for these deposits. According to the report, 96% of deposits in Silicon Valley banks were not covered by the Federal Deposit Insurance Corporation (FDIC) by the end of 2022. This means that the depositors’ money is not insured in case of a bank failure or other financial crisis, leading to a high level of risk for depositors.

Another significant factor for this trend is the economic impact of the ongoing pandemic. Many start-ups, which are the backbone of Silicon Valley’s economy, have been struggling since the pandemic hit, resulting in a sharp decrease in their revenues. This has, in turn, affected the salaries of their employees, forcing some to sell their bank deposits to meet their financial obligations.

In conclusion, the trend of selling deposits at a discount in Silicon Valley banks highlights a serious concern regarding the lack of insurance coverage for these deposits, posing a significant risk to depositors. The economic downturn caused by the pandemic has exposed the vulnerabilities of the region’s booming start-up industry, leading many to struggle to maintain their operations. This situation calls for a prompt response from the relevant authorities to address these issues to protect the depositors and the region’s economic stability.

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Silicon Valley Banks’ Uncovered Deposits Prompt Discounted Sales

Some Silicon Valley bank depositors seek to sell deposits at a discount

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