Regulators took over California-based Silicon Valley Bank on Friday in the second-biggest bank failure in US history.
The Santa Clara-headquartered bank was shuttered by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver.
This is the biggest bank collapse in the US since the 2008 failure of Washington Mutual during the height of the global financial crisis.
Silicon Valley Bank failed after depositors — mostly technology workers and venture capital-backed companies — began withdrawing their money, creating a run on the bank.
Shares of the bank were halted on Friday before the opening bell of the Nasdaq after they tumbled 66 per cent in premarket trading. The FDIC did not announce a buyer of the bank’s assets, which is usually done when there’s an orderly wind-down of a financial institution.
The seizure of Silicon Valley’s assets in the middle of the business day rather than at the close of business is perhaps a sign of how dire the situation had become. Questions were raised this week after the bank announced plans to raise up to $1.75bn in order to strengthen its capital position amid concerns about higher interest rates and the economy.
The bank is the first FDIC-insured bank to fail in more than two years, the last being Almena State Bank in October 2020.
Silicon Valley Bank was not a small bank by any measure — the 16th largest in the US — and had approximately $209bn in total assets and about $175.4bn in total deposits, as of 31 December 2022. Washington Mutual has total assets of $307bn when it was shuttered on 25 September 2008, 10 days after Lehman Brothers failed.
It was unclear how many of the bank’s deposits were above the $250,000 insurance limit guaranteed by FDIC.
The bank was heavily exposed to the tech industry and there is little chance of contagion in the banking sector as there was in the months leading up to the Great Recession more than a decade ago. Major banks have sufficient capital to avoid a similar situation.
The main office and all branches of Silicon Valley Bank will reopen on 13 March and all insured depositors will have full access to their insured deposits no later than Monday morning, according to a statement.
The startup-focused lender had 17 branches in California and Massachusetts, the FDIC said.
With additional reporting by Reuters and the Associated Press.
