Financial regulators have closed Silicon Valley Bank and taken control of its deposits, the Federal Deposit Insurance Corp. announced Friday, in what is the largest U.S. bank failure since the global financial crisis more than a decade ago, CNBC reported.
The collapse of SVB, a key player in the tech and venture capital community, leaves companies and wealthy individuals largely unsure of what will happen to their money.
According to press releases from regulators, the California Department of Financial Protection and Innovation closed SVB and and named FDIC as the receiver. The FDIC in turn has created the Deposit Insurance National Bank of Santa Clara, which now holds insured deposits from SVB.
The FDIC said in the announcement that insured depositors will have access to their deposits no later than Monday morning. SVB’s branch offices will also reopen at that time, under control of the regulator.
The Federal Deposit Insurance Corporation (FDIC) posted a press release titled: “FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank, Santa Clara, California” From the press release:
“Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver. To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank.
“All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advanced dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.
“Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank will reopen on Monday, March 13, 2023. The DINB will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear. Under the Federal Deposit Insurance Act, the FDIC may create a DINB to ensure that customers have continued access to their insured funds…
“…Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-866-799-0959…
The Wall Street Journal reported that the bank is the 16th largest in the U.S., with some $209 billion in assets as of Dec. 31, according to the Federal Reserve. It is by far the biggest bank to fail since the near collapse of the financial system in 2008, second only to the crisis-era collapse of Washington Mutual Inc.
The bank’s parent company, SVB Financial Group, was racing to find a buyer after scrapping a planned $2.25 billion share sale Friday morning. Regulators weren’t willing to wait. The California Department of Financial Protection and Innovation closed the bank Friday within hours and put it under the control of the FDIC.
According to the Wall Street Journal, the bank’s troubles have dragged down the entire industry. The four largest U.S. banks lost some $52 billion in market value Thursday, and a broader index of bank stocks had its worst day in nearly three years. Bank stocks continue to plunge Friday with a number halted for volatility.
Overall, I find this situation to be disturbing. Bank failures are serious situations. This one in particular seems to be primarily affecting extremely wealthy people, who will very likely get their money back – eventually.