Silicon Valley Bank is shut down by regulators, FDIC to protect insured deposits

A sign outside Silicon Valley Bank’s headquarters in Santa Clara, California, U.S., Thursday, March 9, 2023.

David Paul Morris | Bloomberg | Getty’s image

Silicon Valley Bank has been shut down by regulators, who have taken over bank deposits, the Federal Deposit Insurance Corp. announced Friday.

The California Department of Financial Protection and Innovation closed the SVB, and designated the FDIC as the beneficiary. The FDIC in turn has created the Santa Clara Deposit Insurance National Bank, which now holds SVB insured deposits.

The FDIC said in an announcement that insured depositors will have access to their deposits by Monday morning. SVB branch offices will also reopen at that time, under the control of regulators.

The FDIC also said official SVB checks would continue to be cleared.

Standard FDIC insurance covers up to $250,000 per depositor, per bank, for each category of account ownership. It’s unclear exactly how larger accounts or lines of credit for the company will be affected by the closure. The FDIC said it will pay out uninsured depositors a further dividend within the next week.

At the end of December, SVB had total assets of around $209 billion and total deposits of $175.4 billion, according to a press release. The FDIC is not clear what portion of the deposit is above the insurance limit.

SVB is a big bank for venture-backed companies, which are already under pressure from higher interest rates and a slowdown in initial public offerings.

The closure of the SVB will not only impact deposits, but also credit facilities and other forms of financing. The FDIC said SVB loan customers should continue making payments as normal.

The move was a quick fall for SVB. On Wednesday, the bank announced that it was seeking more than $2 billion in additional capital after suffering a $1.8 billion loss from an asset sale.

Shares of parent company SVB Financial Group fell 60% on Thursday, and fell another 60% in premarket trading on Friday before being discontinued.

CNBC’s David Faber reported Friday morning that attempts to raise capital have failed and SVB has turned to a potential sale. However, the rapid outflow of deposits complicates the sales process.

This is the latest news. Please check back for updates.

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