Financial regulators have closed Silicon Valley Bank and brought control of its deposits, the Federal Deposit Insurance Corp. announced Friday, in what’s the biggest U.S. bank failure because the global financial crisis greater than a decade ago.
The collapse of SVB, a key player within the tech and enterprise capital community, leaves corporations and wealthy individuals largely unsure of what is going to occur to their money.
In line with press releases from regulators, the California Department of Financial Protection and Innovation closed SVB and named the FDIC because the receiver. The FDIC in turn has created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB.
The FDIC said within the announcement that insured depositors can have access to their deposits no later than Monday morning. SVB’s branch offices may also reopen at the moment, under the control of the regulator.
In line with the press release, SVB’s official checks will proceed to clear.
A notice hangs on the door of Silicon Valley Bank positioned in San Francisco, California, U.S. March 10, 2023.
Staff | Reuters
The FDIC’s standard insurance covers as much as $250,000 per depositor, per bank, for every account ownership category. The FDIC said uninsured depositors will get receivership certificates for his or her balances. The regulator it should pay uninsured depositors a sophisticated dividend inside the following week, with potential additional dividend payments because the regulator sells SVB’s assets.
Whether depositors with greater than $250,000 ultimately get all their a refund will likely be determined by the amount of cash the regulator gets because it sells Silicon Valley assets or if one other bank takes ownership of the remaining assets. There have been concerns within the tech community that until that process unfolds, some corporations can have issues making payroll.
As of the top of December, SVB had roughly $209 billion in total assets and $175.4 billion in total deposits, in line with the press release. The FDIC said it was unclear what portion of those deposits were above the insurance limit.
The last U.S. bank failure of this size was Washington Mutual in 2008, which had $307 billion in assets.
Biggest bank failures since 2001
| Bank | Assets | Deposits |
|---|---|---|
| Washington Mutual | $307 billion | $188 billion |
| Silicon Valley Bank | $212 billion | $173 billion |
| IndyMac | $32 billion | $19 billion |
| Colonial Bank | $25 billion | $20 billion |
| Guaranty Bank | $13 billion | $12 billion |
Source: FDIC/FactSet
SVB was a significant bank for venture-backed corporations, which were already under pressure as a consequence of higher rates of interest and a slowdown for initial public offerings that made it tougher to boost more money.
The closure of SVB would impact not only the deposits, but additionally credit facilities and other types of financing. The FDIC said loan customers of SVB should proceed to make their payments as normal.
The move represents a rapid downfall for SVB. On Wednesday, the bank announced it was seeking to raise greater than $2 billion in additional capital after suffering a $1.8 billion loss on asset sales.
The shares of parent company SVB Financial Group fell 60% Thursday, and dropped one other 60% in premarket trading Friday before being halted.
CNBC’s David Faber reported Friday morning that the efforts to boost capital had failed and that SVB had pivoted toward a possible sale. Nevertheless, a rapid outflow of deposits was complicating the sale process.
While many Wall Street analysts have argued that the struggles for SVB are unlikely to spread to the broader banking system, shares of other midsized and regional banks were under pressure Friday.
Treasury Secretary Janet Yellen said during testimony before the House Ways and Means Committee on Friday morning that she was “monitoring very rigorously” developments at just a few banks. Yellen made her comments before the FDIC announcement.
