(TheRedAlertNews.com) – HAPPENING NOW: The Federal Deposit Insurance Corp. (FDIC) announced on Friday that the Silicon Valley Bank (SVB) has been closed by financial regulators, and its deposits have been taken over.
This marks the largest failure of a U.S. bank since the global financial crisis over a decade ago.
The collapse of SVB, a crucial player in the tech and venture capital industry, has left many companies and wealthy individuals uncertain about their funds.
According to regulatory press releases, the California Department of Financial Protection and Innovation closed SVB and appointed the FDIC as the receiver. The FDIC then established the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB.
The FDIC stated that insured depositors would be able to access their deposits by Monday morning and that SVB’s branch offices will reopen at that time, under FDIC control. SVB’s official checks will continue to clear.
The FDIC’s standard insurance covers up to $250,000 per depositor per bank for each account ownership category. The regulator stated that uninsured depositors will receive receivership certificates for their balances and that it will pay an advanced dividend to uninsured depositors within the next week, with the possibility of additional dividend payments as the regulator sells SVB’s assets.
The return of funds for depositors with more than $250,000 will depend on the amount the regulator receives from selling Silicon Valley assets or if another bank takes ownership of the remaining assets. There are concerns that some companies may face difficulties making payroll until this process is completed.
As of December 31st, SVB had roughly $209 billion in total assets and $175.4 billion in total deposits. However, the FDIC stated that what portion of these deposits exceed the insurance limit is unclear. The last bank failure of this magnitude was Washington Mutual in 2008, which had $307 billion in assets.
The closure of SVB will impact deposits, credit facilities, and other forms of financing. The FDIC advised loan customers of SVB to continue making their payments as normal.
The bank’s rapid downfall comes after it announced on Wednesday that it sought to raise over $2 billion in additional capital following a $1.8 billion loss on asset sales. The parent company, SVB Financial Group, saw its shares drop 60% on Thursday and another 60% in premarket trading on Friday before trading was halted.
While many Wall Street analysts believe that SVB’s struggles will not spread to the broader banking system, shares of other midsized and regional banks were under pressure on Friday.
CNBC’s David Faber reported that efforts to raise capital failed and that SVB was pivoting toward a potential sale, but a rapid outflow of deposits was complicating the sale process.
Treasury Secretary Janet Yellen stated that she was “monitoring very carefully” developments at a few banks during her testimony before the House Ways and Means Committee on Friday morning. Yellen then convened a meeting with top officials from the Fed, FDIC, and Comptroller of the Currency to discuss the situation at SVB specifically.
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