Silicon Valley Bank, a prominent player in the tech and venture capital industry, has been closed down by financial regulators. This marks the largest bank failure in the United States since the global financial crisis over a decade ago. The Federal Deposit Insurance Corp. (FDIC) has taken control of SVB’s deposits, leaving customers uncertain about the fate of their money.
The California Department of Financial Protection and Innovation has named the FDIC as the receiver and closed down SVB. The FDIC has set up the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB. Insured depositors will be able to access their money by Monday morning at the latest, according to the FDIC. SVB’s branch offices will reopen under the control of the regulator.
The FDIC has also stated that SVB’s official checks will continue to clear. Companies and wealthy individuals who entrusted their funds to SVB are likely to be impacted by this unexpected development.
Silicon Valley Bank (SVB) has been shut down by regulators, becoming the largest US bank to fail in over a decade. The Federal Deposit Insurance Corporation (FDIC) has stepped in to oversee the sale of SVB’s assets and ensure depositors are compensated for their losses.
Depositors with up to $250,000 in each account ownership category will be fully insured by the FDIC. However, those with deposits exceeding this amount may not receive all of their money back immediately. Instead, uninsured depositors will receive receivership certificates for their balances and an advanced dividend payment within the next week. The FDIC may issue further dividend payments as it sells off SVB’s assets.
It is unclear how many depositors have balances above the $250,000 limit, but as of December 2022, SVB had $209 billion in total assets and $175.4 billion in total deposits. There are concerns that until the sale process is complete, some companies may struggle to meet payroll obligations.
The last US bank to fail on this scale was Washington Mutual in 2008, which had $307 billion in assets. The FDIC has assured depositors that it will work to ensure a smooth and orderly transition of SVB’s assets to new ownership.
Silicon Valley Bank (SVB), a major financial institution catering to venture-backed companies, has suffered a major setback due to higher interest rates and a slowdown in initial public offerings. The bank announced on Wednesday that it needed to raise more than $2 billion in additional capital after incurring a $1.8 billion loss on asset sales.
Following the announcement, the parent company SVB Financial Group’s shares plummeted by 60% on Thursday and another 60% in premarket trading on Friday. Efforts to raise capital failed, and the bank is now exploring the possibility of a sale. However, a rapid outflow of deposits is complicating the process.
While Wall Street analysts believe that the struggles faced by SVB are unlikely to spread to the broader banking system, the share prices of other mid-sized and regional banks have been affected. This has prompted Treasury Secretary Janet Yellen to convene a meeting of top officials at the Fed, the FDIC, and the Comptroller of the Currency to discuss the situation at SVB. During her testimony before the House Ways and Means Committee, Yellen revealed that she was “monitoring very carefully” developments at a few banks.
The FDIC has assured SVB’s loan customers that they should continue making their payments as normal. Nevertheless, the bank’s closure would have significant ramifications not only for deposits but also for credit facilities and other forms of financing.
