US shuts down Silicon Valley Bank amid sudden collapse

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All insured depositors will have full access to their deposits no later than Monday morning, says Federal Deposit Insurance Corporation

US regulators have shut down Silicon Valley Bank (SVB) amid its sudden collapse, the Federal Deposit Insurance Corporation (FDIC) announced in a statement on Friday.

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SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver, it said.

FDIC created the Deposit Insurance National Bank of Santa Clara (DINB) to protect insured depositors, while it immediately at the time of closing transferred all insured deposits of SVB to the DINB, it added.

The troubled commercial bank headquartered in Santa Clara was the largest bank in Silicon Valley based on local deposits, and it was among the biggest banks in the nation.

Its sudden collapse left many venture capital firms and millions of individuals in the US tech sector with uncertainty surrounding their deposits, loans, and investments, also sending ripples among tech firms trading on the Nasdaq and the cryptocurrency community.

The FDIC, which insures deposits and examines financial institutions for safety and consumer protection, said all insured depositors will have full access to their insured deposits no later than Monday morning.

While uninsured depositors will be paid in advance dividend within the next week, they will receive a receivership certificate for the remaining amount of their uninsured funds, said FDIC, adding that future dividend payments may be made available to uninsured depositors as it sells the assets of SVB.

Customers with accounts in excess of $250,000 were asked to contact the FDIC, which typically covers up to that amount per depositor.

SVB had approximately $209 billion in total assets and around $175.4 billion in total deposits as of the end of 2022, according to the FDIC.

While the last US-based bank going under of that size was Washington Mutual with $307 billion worth of assets in 2008 during the financial crisis, the most recent FDIC-insured institution to close was Almena State Bank in the state of Kansas during October 2020.

Treasury Secretary Janet Yellen said Friday there are a number of banks that are closely watched by the Treasury Department after the SVB’s collapse.

“There are recent developments that concern a few banks that I’m monitoring very carefully. And when banks experience financial loss, it is, and should be, a matter of concern,” Yellen said during her hearing before the House of Representatives Ways amp; Means Committee.

he later convened leaders from the Federal Reserve, FDIC and the Office of the Comptroller of the Currency to discuss developments around SVB, the Treasury Department said in a statement.

“Secretary Yellen expressed full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient and regulators have effective tools to address this type of event,” it said.

The stock price of SVB’s parent firm SVB Financial plummeted more than 60% on Thursday, while its trading was halted multiple times due to volatility, after it sold $21 billion bond portfolio at a $1.8 billion loss.

CEO Greg Becker said Wednesday in a statement that the bank has sold “substantially all” of its securities portfolio and commenced a public offering that aims to raise $1.75 billion between common equity.

Becker added that SVB’s exposure to crypto is minimal, noting that the bank works across life science/health care industries, including private equity and venture capital, climate technology, biopharma, enterprise software, and fintech.