After SVB collapse, almost 190 new banks could fail, says new study

An alarming new study suggests that almost 190 new banks could fail in the US, following the collapse of Silicon Valley Bank. The report, produced by congressional research service firm, Capitol Forum, highlights that the failure of SVB, which was the largest lender to US start-ups, has created a ripple effect on smaller banks, many of whom rely on deposits raised from progressive start-ups. This, in turn, has led to a significant increase in bank failures, highlighting the fragility of the banking system supporting innovative tech start-ups.

According to the report, nearly half of all US banks that rely on deposits from Silicon Valley start-ups could fail, creating a knock-on effect on the wider economy. Since Silicon Valley Bank stopped issuing loans to start-ups, many smaller banks have jumped in to fill the gap. However, as these smaller lenders often have a weaker underwriting process than larger lenders, there are fears that they may be more vulnerable to a downturn in the economy or the tech sector.

This report underscores the importance of robust banking infrastructure to support innovation in the tech industry. The failure of one bank could have knock-on effects not just on the start-ups they support, but on the economy as a whole. The study emphasizes the need for the US government to monitor the banking sector carefully, ensuring that regulations are in place to support start-ups while also safeguarding the broader financial system.