On Friday, the California Department of Financial Protection and Innovation shut down Silicon Valley Bank (SVB) as tech startups pulled out their deposits.[0] The US Federal Deposit Insurance Corporation (FDIC) assumed control of the bank and put a freeze on withdrawals.[1] This marks the largest bank failure since the 2008 financial crisis and the second-largest in US history.[2]
The collapse of SVB began late Wednesday when it announced a $21 billion securities sale at a $1.8 billion loss and a plan to raise $2.25 billion.[3] In response, SVB Financial Group-owned bank’s share price tanked by over 60% to $106.04.[4] The company also cut its guidance and deposits dwindled with startups facing a funding drought and concerns about SVB’s loans to the tech industry.[5]
The FDIC set up the Deposit Insurance National Bank of Santa Clara to protect insured depositors, promising that these depositors would have access to their funds by Monday morning.[6] Uninsured depositors will receive an “advance dividend” of unspecified size “within the next week” and future dividend payments may be made after the FDIC sells SVB’s assets.[7]
The SVB collapse could have a domino effect on the rest of the banking sector, according to Pershing Square hedge fund boss Bill Ackman. He suggested a taxpayer bailout, implying SVB somehow provided a systemic risk to the US economy were it not rescued.[8]
The Federal Deposit Insurance Corporation (FDIC) revealed that SVB had assets worth $209 billion and deposits totaling $175.4 billion when it was taken over.[9] However, more than 93% of SVB’s $161 billion in deposits were not insured, leaving it unclear what will happen to that money.[10] All insured depositors will have full access to their insured deposits no later than Monday morning.[3]
0. “Silicon Valley Bank is being shut down today by regulators” TechCrunch, 10 Mar. 2023, https://techcrunch.com/2023/03/10/silicon-valley-bank-is-being-shut-down-today-by-regulators/
1. “Troubles at Silicon Valley Bank ripple across Boston tech scene” The Boston Globe, 10 Mar. 2023, https://www.bostonglobe.com/2023/03/10/business/troubles-silicon-valley-bank-ripple-across-boston-tech-scene
2. “Sizing Up Silicon Valley Bank’s $11B Real Estate Exposure” The Real Deal, 10 Mar. 2023, https://therealdeal.com/sanfrancisco/2023/03/10/sizing-up-silicon-valley-banks-real-estate-exposure
3. “Companies scramble to meet payroll, pay bills after SVB’s swift failure” CNBC, 10 Mar. 2023, https://www.cnbc.com/2023/03/10/silicon-valley-bank-customers-scramble-to-meet-payroll-pay-bills.html
4. “Ackman calls on US government to consider Silicon Valley Bank bailout” Business Insider, 10 Mar. 2023, https://www.businessinsider.com/silicon-valley-bank-bill-ackman-billionaire-government-bailout-svb-2023-3
5. “Dow Jones Futures Fall With Jobs Report Due After S&P 500 Sell-Off; SVB Financial Still Crashing | Investor’s Business …” Investor’s Business Daily, 10 Mar. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-sp-500-breaks-support-as-svb-financial-slams-bank-stocks-jobs-report-due/
6. “UPDATE: SVB failure triggers shockwaves across biotech industry” FierceBiotech, 10 Mar. 2023, https://www.fiercebiotech.com/biotech/biotech-bank-svbs-capital-crunch-sparks-bank-run-companies-huddle-consider-exposure
7. “How Silicon Valley Bank’s Failure Is Creating Total Chaos” New York Magazine, 10 Mar. 2023, https://nymag.com/intelligencer/2023/03/how-silicon-valley-banks-failure-is-creating-total-chaos.html
8. “SVB collapse highlights $620 billion hole lurking in banks’ balance sheets” Fortune, 10 Mar. 2023, https://fortune.com/2023/03/10/svb-collapse-fdic-takeover-martin-gruenberg-620-billion-hole-banks-balance-sheet
9. “Tech CEO with millions in Silicon Valley Bank: ‘Innovation in the startup world is bleeding today’” Fox Business, 10 Mar. 2023, https://www.foxbusiness.com/technology/tech-ceo-millions-silicon-valley-bank-innovation-startup-world-bleeding-today
10. “What to know about Silicon Valley Bank and bank runs” Axios, 10 Mar. 2023, https://www.axios.com/2023/03/10/svb-bank-run-silicon-valley-bank