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Silicon Valley Bank Fails – FDIC to Cover Up to $250k in Deposits


On Friday, March 12th, 2023, Silicon Valley Bank (SVB) became the second-largest bank failure in U.S. history.[0] The bank, which had been a fixture in the venture capital space for decades, was shut down by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.[1]

The FDIC will cover up to $250,000 per depositor and may be able to begin paying those depositors as early as Monday.[2] The majority of SVB’s customers were businesses that had large amounts of money stored without insurance, which caused alarm about how to recover the remaining funds.[2]

The proxy statement filed by SVB recently disclosed that the bank’s Chief Risk Officer departed their post in the early part of 2020, and a new one was not hired until January 2021.[3] The timing of these events suggests a lack of oversight in the bank’s operations, which may have contributed to the bank’s sudden failure.

Treasury Secretary Janet Yellen has ruled out a federal bailout for Silicon Valley Bank’s investors, but said financial regulators are “concerned” about the impact to depositors and working to address their needs.[4] The FDIC is offering all insured depositors full access to their funds by Monday, and will be providing an advance dividend to those with uninsured deposits within the next week.[5]

The collapse of SVB has been a shock to the financial markets and the tech industry, as the bank was a major lender to the sector, with clients such as Airbnb, Stripe and Coinbase. SVB was founded in 1983 and had $210 billion in assets, but faced liquidity problems due to its exposure to risky loans and investments.[6]

On Thursday, after SVB had sold off its fixed-income portfolio worth $21 billion, its share price crashed due to the announcement of a $1.8 billion loss.[7] SVB paid about $120 billion for debt securities on its balance sheet, but those securities had a current market value of only $102 billion as of December 31, 2022.[8]

The FDIC is selling off the bank’s assets to pay back its customers, including depositors and creditors.

0. “Takeaways from America’s second-largest bank failure” CNN, 11 Mar. 2023, https://www.cnn.com/2023/03/11/business/svb-collapse-roundup-takeaways/index.html

1. “Here’s how much of your bank deposits are FDIC protected” The Washington Post, 11 Mar. 2023, https://www.washingtonpost.com/business/2023/03/10/faq-fdic-insurance

2. “Treasury Secretary Janet Yellen says U.S. government won’t bail out Silicon Valley Bank” CNBC, 12 Mar. 2023, https://www.cnbc.com/2023/03/12/treasury-secretary-janet-yellen-says-us-government-wont-bail-out-silicon-valley-bank.html

3. “Silicon Valley Bank had no official chief risk officer for 8 months while the VC market was spiraling” Fortune, 10 Mar. 2023, https://fortune.com/2023/03/10/silicon-valley-bank-chief-risk-officer

4. “Yellen rules out bailout for Silicon Valley Bank: “We’re not going to do that again”” CBS News, 12 Mar. 2023, https://www.cbsnews.com/news/janet-yellen-silicon-valley-bank-bailout-face-the-nation-interview-today-2023-03-12/

5. “PR-16-2023 3/10/2023” FDIC, 10 Mar. 2023, https://www.fdic.gov/news/press-releases/2023/pr23016.html

6. “Silicon Valley Bank – The Aftermath. Which Companies Were Impacted?” TipRanks, 12 Mar. 2023, https://www.tipranks.com/news/silicon-valley-bank-the-aftermath-of-the-closure-and-impacted-companies

7. “SVB Collapse Has Short Sellers Making $500M, Now they Have to Collect” Bloomberg, 10 Mar. 2023, https://www.bloomberg.com/news/articles/2023-03-10/shorts-make-500-million-on-svb-demise-collecting-won-t-be-easy

8. “‘This hit like a ton of bricks’: 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

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