FDIC Assumes Control of Silicon Valley Bank After Largest Bank Failure Since 2008

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