Silicon Valley Bank Meltdown: Here's How It Happened in Real Time

Financial regulators have closed Silicon Valley Bank and took control of its deposits, the Federal Deposit Insurance Corp. notified Friday, in what is the largest U.S. bank failure since the global financial crisis more than a decade ago.

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 regulatory press releases, the California Department of Financial Protection and Innovation closed SVB and appointed the FDIC as receiver. The FDIC in turn has created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB.

FDIC plans to pay SVB depositors after bank failure

The FDIC said in the announcement that insured depositors will have access to their deposits by Monday morning. SVB’s branch office will also reopen then, under the control of the supervisory authority.

According to the press release, SVB’s official controls will continue to clear.

A Brink’s armored truck is parked in front of the defunct Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California.

Justin Sullivan | Getty Images

The FDICs standard insurance covers up to $250,000 per depositor, per bank, for each account holder category. The FDIC said uninsured depositors will receive certificates for their balances. The regulator said it will pay uninsured depositors an advance dividend within the next week, with potential further dividend payments as the regulator sells SVB’s assets.

Whether depositors with more than $250,000 ultimately get all their money back will be determined by how much money the regulator gets when it sells Silicon Valley assets or if another bank takes ownership of the remaining assets. There were concerns in the tech community that until that process is developed, some companies may have trouble making payroll.

At the end of December, SVB had approximately $209 billion in total assets and $175.4 billion in total deposits, according to the press release. The FDIC said it was unclear what portion of those deposits were above the insured limit.

The last US bank failure of this size was Washington Mutual in 2008, which had $307 billion in assets.

Biggest bank failure since 2001

Bank Assets Deposits
Washington Mutual 307 billion dollars 188 billion dollars
Silicon Valley Bank 212 billion dollars 173 billion dollars
IndyMac 32 billion dollars 19 billion dollars
Colonial Bank 25 billion dollars 20 billion dollars
The guarantee bank 13 billion dollars 12 billion dollars

Source: FDIC/Fact Statement

SVB was a major bank for venture-backed companies, already under pressure from higher interest rates and a slowdown in IPOs that made it harder to raise additional cash.

The closure of SVB would affect not only deposits but also credit facilities and other forms of financing. The FDIC said loan customers at SVB should continue to make their payments as usual.

The move means a quick fall for SVB. On Wednesday, the bank said it was looking to raise more than $2 billion in additional capital after suffering a $1.8 billion loss on asset sales.

A notice hangs on the door of Silicon Valley Bank in San Francisco, California, USA on March 10, 2023.

Personnel | Reuters

The shares in the parent company SVB Financial Group fell 60% on Thursdayand lost another 60% in premarket trading on Friday before being halted.

CNBC’s David Faber reported Friday morning that efforts to raise capital had failed and that SVB had swung towards a potential sale. However, a rapid outflow of deposits complicated the sales process.

While many Wall Street analysts have argued that the fight for SVB is unlikely to spread to the wider banking system, stakes in other medium-sized and regional banks came under pressure Friday.

Treasury Secretary Janet Yellen said during testimony before the House Ways and Means Committee on Friday morning that she is “monitoring very closely” developments at some banks. Yellen made her comments before the FDIC announcement.

Shortly after leaving Capitol Hill, Yellen convened a meeting of top officials at the Fed, the FDIC and the Comptroller of the Currency specifically to discuss the situation at SVB.