A big bank went bankrupt. That’s why it’s not 2008 again.

NEW YORK. The financial institution best known for its relationships with the world’s cutting-edge tech start-ups and venture capital, Silicon Valley Bank, faced one of the oldest problems in the banking industry — bank runs, leading to its collapse on Friday.

Its collapse is the biggest failure of a financial institution since Washington Mutual collapsed in the midst of a financial crisis more than a decade ago. And it had an immediate effect. Some bank-linked startups have struggled to pay their workers and have feared that they may have to put projects on hold, lay off or lay off employees until they have access to their funds.

How did it happen? Here’s what you need to know about why the bank failed, who suffered the most, and what you need to know about how it may or may not affect the U.S. banking system as a whole.

Silicon Valley Bank has been hit hard by the decline in technology stocks over the past year, as well as the Federal Reserve’s aggressive plan to raise interest rates to fight inflation.

Over the past couple of years, the bank has bought billions of dollars worth of bonds using customer deposits, as a regular bank would normally do. These investments are generally safe, but the value of these investments has fallen because they paid lower interest rates than comparable bonds if issued in today’s higher interest rate environment.

This is usually not a problem because banks keep them for a long time, unless they have to sell them in an emergency.

But Silicon Valley’s clients have been mostly startups and other tech-focused companies that have become cash-strapped over the past year. Venture capital was drying up, companies couldn’t get additional funding rounds for money-losing businesses, and so they had to tap into their existing funds—often deposited in a Silicon Valley bank that was at the center of the tech startup universe.

So Silicon Valley customers started withdrawing their deposits. Initially, this was not a big problem, but withdrawals began to require the bank to sell its own assets in order to satisfy customer withdrawal requests. Because Silicon Valley’s customers were mostly businesses and wealthy individuals, they were likely more fearful of a bank failure as their deposits exceeded $250,000, which is the state’s limit on deposit insurance.

This necessitated the sale of normally safe bonds at a loss, and these losses added up to the fact that Silicon Valley Bank became effectively insolvent. The bank tried to raise additional capital through outside investors, but was unable to find them.

The trendy technology-focused bank has been brought down by the oldest problem in banking: the good old bank run. Banking regulators had no choice but to seize the assets of Silicon Valley Bank to protect the assets and deposits still held by the bank.

Two big problems remain at Silicon Valley Bank, but both could lead to new problems if not addressed quickly.

The most pressing problem is the large deposits of Silicon Valley Bank. The federal government insures deposits up to $250,000, but anything above that level is considered uninsured. The Federal Deposit Insurance Corporation said insured deposits would be available Monday morning. However, the vast majority of Silicon Valley Bank’s deposits were uninsured, a unique characteristic of the bank as its clients are mostly startups and wealthy tech workers.

At the moment, all this money is not accessible and will probably have to be unlocked in an orderly manner. But many businesses cannot wait weeks to access funds to cover payroll and office costs. This can lead to vacations or layoffs.

Second, Silicon Valley Bank has no buyer. Usually banking regulators are looking for a stronger bank to take over the assets of a bankrupt bank, but in this case another bank did not come forward. A bank that bought Silicon Valley Bank could solve some of the money problems startups can’t get right now.

At the moment, no, and experts do not expect any problems to spread to the wider banking sector.

The Silicon Valley Bank was large but had a unique existence, serving almost exclusively the tech world and venture capital-backed companies. He did a great job with the part of the economy that was hit hard last year.

Other banks are much more diversified across multiple industries, customer bases, and geographies. The Fed’s latest round of “stress tests” of major banks and financial institutions showed that they would all survive a deep recession and a significant drop in unemployment.

However, in the San Francisco Bay Area and the world of tech start-ups, there could be economic repercussions if the remaining cash is not released quickly.