Financial regulators have shut down Silicon Valley Bank and taken control of its deposits, announced the Federal Deposit Insurance Corp., in what is the largest US 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, has left companies and wealthy individuals unsure of what will happen to their money.
According to a press release from the regulator, the California Department of Financial Protection and Innovation closed SVB and named the FDIC as receiver. The FDIC then created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits of SVB.
The FDIC said in an announcement that insured depositors will have access to deposits no later than Monday morning. SVB branches will also reopen at that time, under the control of the regulator.
According to the press release, the official SVB examination will continue to be removed.
Standard FDIC insurance covers up to $250,000 per depositor, per bank, for each account holding category. It’s unclear exactly how the company’s larger accounts or lines of credit will be affected by the closure. The FDIC said it will pay uninsured dividends to depositors next week.
At the end of December, SVB had total assets of $209 billion and total deposits of $175.4 billion, according to a press release. The FDIC said it is not clear what portion of those deposits are above insurance limits.
SVB is the main bank for venture-backed companies, which have come under pressure from higher interest rates and a slowdown in initial public offerings that have made it harder to raise additional cash.
The closure of SVB will affect not only deposits, but also credit facilities and other forms of financing. The FDIC said SVB loan customers should continue making payments as usual.
The move represents a swift downfall for SVB. On Wednesday, the bank announced it plans to raise more than $2 billion in additional capital after suffering a $1.8 billion loss on asset sales.
Shares of parent company SVB Financial Group fell 60% on Thursday, and fell another 60% in premarket trading on Friday before being halted.
CNBC’s David Faber reported Friday morning that efforts to raise capital have failed and SVB has pivoted to a potential sale. However, the rapid outflow of deposits resulted in the sale process.
While many Wall Street analysts said that the struggle for SVB could not spread to the wider banking system, the shares of other mid-sized and regional banks were under pressure on Friday.
Treasury Secretary Janet Yellen said in testimony to the House Ways and Means Committee on Friday morning that she is “watching very carefully” developments at several banks. Yellen made the comments before the FDIC announcement.