Watch: Massive line forms outside Silicon Valley Bank as customers panic, over $200 billion in peril

Silicon Valley Bank, the 16th biggest in the United States at the end of last year, has collapsed, causing panic among its customers and triggering a rush of withdrawals. On Friday, footage posted on Twitter showed dozens of customers lining up outside the bank's Bay Area branch in Menlo Park, California, in pouring rain, hoping to withdraw whatever cash they had left. 

Similar scenes were reported at other branches across the country, including in Manhattan, where a group of disgruntled tech founders turned up at the bank's office to withdraw their funds, prompting the building managers to call the police.

On Friday, California banking regulators closed start-up-focused SVB and appointed the FDIC to take control of the lender's deposits.

The bank's shares plummeted by more than 80 per cent on Wednesday night, after it announced that it had suffered a $1.8 billion loss following a fire sale in its asset portfolio, which was primarily comprised of US government debt. The news sent shockwaves through the market.

To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). The main office and all branches of SVB will reopen on March 13 and all insured depositors have been given full access to their insured deposits no later than Monday morning, an official statement said.

Founded in 1982, Silicon Valley Bank specialised in lending to start-up technology companies, providing funds for tens of thousands of fledgling businesses. Its failure is the largest since the collapse of Washington Mutual during the 2008 financial crisis, which was the largest savings and loan association in the US at the time.

The bank's troubles have also had a significant impact on the wider financial industry. Trading in Silicon Valley Bank's shares was halted on Friday, as the crisis continued to escalate. The bank was reportedly in talks to sell itself, but any chance of a deal quickly faded as its customers rushed to withdraw their cash. 

This triggered a rout in the shares of major US banks, with JP Morgan down 7 per cent, Citigroup falling 7.1 per cent, Morgan Stanley slipping 7.2 per cent, Goldman Sachs sinking 7 per cent, and Bank of America dropping 11 per cent.

European banks were also hit, with shares in Deutsche Bank down 7.4 per cent, and France's Societe Generale and BNP Paribas falling 4.5 per cent and 3.8 per cent respectively.

Also read: Elon Musk says ‘open’ to the idea of buying Silicon Valley Bank