Jakarta –
Minister of Finance Sri Mulyani Indrawati revealed the cause of bankruptcy Silicon Valley Bank (SVB). According to Sri Mulyani, one of the triggers for SVB’s bankruptcy was the decline in the performance of startup companies
Sri Mulyani explained that SVB is a very special bank. SVB funding is only given to start-up companies or startups. So, the drop in startup performance in 2022 also poses a threat to the bank.
“Many preliminary analyzes emerged today as the cause of SVB’s bankruptcy, because this is a bank that specifically funds startups and many startups will experience a very deep decline in performance in 2022,” said Sri Mulyani in a press conference at her office, Central Jakarta, Tuesday (14 /3/2023).
The drop in startup performance has reduced the threat of disbursing deposit funds owned by SVB for credit to startup companies. Even though the deposit funds collected were very large.
Sri Mulyani explained that SVB experienced a very rapid increase in deposits collected. The number has tripled in less than 2 years. With this condition, SVB’s balance sheet was finally depressed.
“SVB experienced a more than 3-fold increase in deposits in less than 2 years, there were a lot of deposits and then their distribution was halted because startup performance declined significantly causing a pressure on the balance sheet,” explained Sri Mulyani.
The problem grew when the collection of deposit funds that could not be channeled to startup companies at the SVB was directed to buy US government securities. According to Sri Mulyani, it was not the right choice.
This is because investing in state securities is not profitable because the central bank’s interest rate has increased in recent times. In the end, state securities taken on behalf of the SVB are detrimental because their prices have decreased.
“On the other hand, these very high deposits were bought for long-term state securities in the US and state securities experienced a decrease in value because the Fed’s interest rate rose, so the price of the securities experienced a correction,” said Sri Mulyani.
(hal/hns)