Silicon Valley Bank: From Tech Bank to FDIC Intervention

Silicon Valley Bank (SVB) was founded in 1983 in Santa Clara, California with the intention of becoming the financial institution for the tech sector.[0] As of 2021, SVB claimed to bank for nearly half of all US venture-backed startups and partnered with many of the venture capital firms that fund those startups.[1] On March 8, its parent company, SVB Financial Group, announced it had sold $21 billion of assets at a $1.8 billion loss and was going to sell $1.75 billion worth of shares to help plug that hole.[2] The clients of the bank started to worry, causing the stock price to fall, and the next evening, people tried to take out $42 billion, meaning the bank was unable to pay its debts.[3] By Friday, the SVB was under the control of the Federal Deposit Insurance Corporation.[3]

Silicon Valley Bank had become a vital part of the tech industry’s financial infrastructure.[4] It was the go-to lender for tech startups that appeared too risky in the eyes of larger, more traditional banks.[1] The bank had become reliant on low-cost financing from a federal home-loan bank and many of its prototypical clients—venture capitalists, start-ups, and technology firms—were struggling.[5] It was also a risky decision for a bank to take most of its deposits from a single, tightly-knit industry, but for much of the last decade, low interest rates, easy money and cheap loans meant that this industry was on the upswing.[4]

The FDIC stepped in to offer insurance coverage up to a certain limit per depositor, per bank, for each account ownership category, and to act as the “receiver” of the failed bank, meaning that it sells and collects the assets of the failed bank and settles its debts, including claims for deposits in excess of the insured limit.[6] Yesterday, Janet L. Yellen (Secretary of the Treasury), Jerome H. Powell (Federal Reserve Board Chair), and Martin J. Gruenberg (FDIC Chairman) released a statement declaring that SVB account holders will have complete protection and access to their funds by March 13.[7]

Large banks in general are better-positioned to take some market share from those smaller banks as most of them are in far better financial shape than small ones.[8] Unlike 2008, most of the large banks don’t appear to have credit problems from over-aggressive lending and they are less at risk of liquidity draining from them than small banks.[9]

0. “How Silicon Valley Bank’s failure will affect the tech industry, according to a historian”, 16 Mar. 2023,

1. “Silicon Valley Bank failure could wipe out ‘a whole generation of startups’” NPR, 11 Mar. 2023,

2. “How does a bank collapse in 48 hours? A timeline of the SVB fall” CNN, 13 Mar. 2023,

3. “Silicon Valley Bank’s failure, the government’s depositor rescue, and venture capitalists’ incredible tantrum.” Slate, 13 Mar. 2023,

4. “Opinion | The Boys Who Cried ‘Woke!’” The New York Times, 14 Mar. 2023,

5. “We Know Who’s to Blame for the Silicon Valley Bank Failure” The Atlantic, 16 Mar. 2023,

6. “Bank failures aren’t as uncommon as you think. Here’s what happens when a bank fails and how to know if your money is safe” Fortune, 13 Mar. 2023,

7. “A bailout or not? Did the federal government bailout Silicon Valley Bank and Signature Bank?” ABC News, 16 Mar. 2023,

8. “Government fear-mongering over Silicon Valley Bank — and how to profit” New York Post , 15 Mar. 2023,

9. “March 2023 Newsletter: A Look at Bank Solvency” Lyn Alden, 13 Mar. 2023,