Silicon Valley Bank has been closed by regulators, who have taken control of the bank’s deposits, according to the Federal Deposit Insurance Corp (FDIC).
On Friday, the California Department of Financial Protection and Innovation closed SVB and named the FDIC as the receiver. The FDIC has since created the Deposit Insurance National Bank of Santa Clara to hold the insured deposits from SVB. Insured depositors will have access to their deposits no later than Monday morning, and SVB’s branch offices will reopen at that time under the regulator’s control.
The FDIC’s standard insurance covers up to $250,000 per depositor, per bank. However, it remains unclear how larger accounts or credit lines for companies will be impacted by the closure. The FDIC has said that it will pay uninsured depositors an advanced dividend within the next week.
This marks a rapid decline for SVB, which had announced on Wednesday that it was looking to raise over $2 billion in additional capital after suffering a $1.8 billion loss on asset sales. SVB Financial Group’s shares plummeted 60% on Thursday and fell another 60% in premarket trading on Friday before being halted. CNBC’s David Faber reported that efforts to raise capital had failed, and SVB had turned towards a potential sale. However, a rapid outflow of deposits was complicating the sales process.
It is not clear what caused the sudden downfall of Silicon Valley Bank, which has been operating since 1983 and is well-known for its focus on the tech industry. However, some industry experts speculate that the bank may have suffered losses due to its exposure to high-risk tech startups, which have been hit hard by the pandemic.
This news comes as a shock to the banking industry and its customers, many of whom rely on Silicon Valley Bank for its specialized services and expertise in the tech sector. The bank has long been considered a key player in Silicon Valley’s startup ecosystem, and its sudden closure has raised concerns about the broader health of the tech industry and the stability of the financial sector.