Regulators shut down Silicon Valley Bank on Friday, making it the largest U.S. bank failure since the 2008 recession.[0] Tens of millions in customer deposits were withdrawn on Thursday in a run on the bank, spurring fears that other mid-sized banks could face similar pressure without federal support.[1] The Federal Deposit Insurance Corporation (FDIC) was appointed receiver, and is working to find a buyer for the institution.[2]
Silicon Valley Bank was founded in 1983 in Santa Clara, California, and quickly became the bank for the burgeoning tech sector there.[1] It catered to venture capital and private equity, and claimed to bank for nearly half of all U.S. venture-backed startups as of 2021.[3] However, the bank faced liquidity problems due to its exposure to risky loans and investments.[4]
On Wednesday, SVB Financial Group announced it would undertake a $2.25 billion share sale after selling $21 billion of securities from its portfolio at a nearly $2 billion loss.[5] The move spooked markets and clients, and the share price of SVB Financial plunged on Thursday.[6] By Friday morning, trading of the stock was halted, and there were reports SVB was in talks to sell.[3] It was reported that major venture capitalists like Peter Thiel and Union Square Ventures instructed their companies to withdraw their funds from the bank as soon as possible.[3]
More than 85% of Silicon Valley Bank’s deposits were uninsured, according to estimates in a recent regulatory filing.[2] Officials from the FDIC are exploring the possibility of providing a government guarantee for all deposits in a bank, with the current insurance limit set at $250,000, according to The Washington Post.[3]
Treasury Secretary Janet Yellen said Sunday that the federal government will not provide a bailout for Silicon Valley Bank’s investors after the bank was abruptly shuttered, but said financial regulators are “concerned” about the impact on depositors and working to address their needs.[7] Apart from giving out loans, SVB put a large portion of funds into Treasury bonds that won’t reach maturity for several years.[8] The increase in interest rates by the Federal Reserve has caused bond prices to decrease.[8]
The U.S. government announced on Sunday evening that all clients of the failed Silicon Valley Bank would have access to their funds on Monday morning.[9] This coming Monday, the FDIC has confirmed that customers will have unrestricted access to their insured deposits up to $250,000.[5]
0. “PR-16-2023 3/10/2023” FDIC, 10 Mar. 2023, https://www.fdic.gov/news/press-releases/2023/pr23016.html
1. “Fed and FDIC discussing backstop to make SVB depositors whole and stem contagion fears: Source” CNBC, 12 Mar. 2023, https://www.cnbc.com/2023/03/12/fed-fdic-discussing-backstop-to-make-svb-depositors-whole-and-stem-contagion-fears-source.html
2. “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/
3. “What is Silicon Valley Bank? The bank’s collapse, explained.” Vox.com, 10 Mar. 2023, https://www.vox.com/technology/23634433/silicon-valley-bank-collapse-silvergate-first-republic-fdic
4. “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
5. “How does a bank collapse in 48 hours? A timeline of the SVB fall” CNN, 11 Mar. 2023, https://www.cnn.com/2023/03/11/business/svb-bank-collapse-explainer-timeline/index.html
6. “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
7. “No Bailout for SVB. Here’s What to Expect.” Barron’s, 12 Mar. 2023, https://www.barrons.com/articles/no-bailout-for-svb-heres-what-to-expect-d1a9ddc8
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
9. “FDIC holds auction for SVB amid growing uncertainty” POLITICO, 12 Mar. 2023, https://www.politico.com/news/2023/03/12/fdic-holds-auction-for-svb-amid-growing-uncertainty-00086696