Silicon Valley Bank shut down! California regulator takes action after stock crashes 85%

California banking regulators closed start-up-focused Silicon Valley Bank on Friday and appointed the Federal Deposit Insurance Corporation to take control of the lender's deposits, according to a statement. 

A client dashboard on Silicon Valley Bank's website, which is supposed to show account balances and money transfers, was down on Friday afternoon, a UK-based client of the bank told Reuters.

Silicon Valley Bank is the first Federal Deposit Insurance Corporation-insured bank to fail in more than two years, the last being Almena State Bank in October 2020.

What will happen to customers' deposits

The main office and all branches of Silicon Valley Bank will reopen on March 13 and all insured depositors will have full access to their insured deposits no later than Monday morning, according to the statement.

To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank.

All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.

The DINB will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear. Under the Federal Deposit Insurance Act, the FDIC may create a DINB to ensure that customers have continued access to their insured funds.

Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-866-799-0959.

The FDIC as receiver will retain all the assets from Silicon Valley Bank for later disposition. Loan customers should continue to make their payments as usual.

Shares of SVB were halted on Friday after tumbling as much as 66% in premarket trading.

Silicon Valley Bank had about $209 billion in total assets and about $175.4 billion in total deposits, as of Dec. 31, 2022.

The startup-focused lender had 17 branches in California and Massachusetts. Treasury Secretary Janet Yellen told lawmakers on Capitol Hill Friday the department was aware of recent developments and was monitoring the situation, calling it "a matter of concern" when banks experience losses, according to CNBC.

SVB Financial Group told its employees in a memo, earlier on Friday, that they should work from home until further notice.

"SVB is undergoing a series of conversations that have not been concluded yet to determine next steps for the company," the bank said in a memo seen by Reuters.

Essential and branch employees are excluded from the request to work from home, the memo added.

SVB Financial Group is exploring options, including a sale, after its efforts to raise capital through a stock sale failed, reported Reuters earlier on Friday as a crisis at the tech-heavy lender rippled through global markets and hit banking stocks. SVB's troubles emerged from deposit outflows due to heavy spending by clients in the tech and healthcare sectors, raising questions over whether other banks would have to cover deposit outflows with loss-making bond sales too.

With inputs from Reuters

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