Silicon Valley Bank was closed down by US authorities on Friday (local time), sending global banking shares into upheaval as markets worried about possible contagion from the largest banking collapse since the 2008 financial crisis.
California officials shut down the tech lender and turned it over to the US Federal Deposit Insurance Corporation (FDIC). The FDIC is acting as a receiver, which means it will liquidate the bank’s assets in order to repay its clients, including depositors and creditors.
Silicon Valley Bank failed following a dramatic 48-hour period in which a bank run and a capital crisis resulted in the second-largest financial institution bankruptcy in American history.
According to the FDIC, all insured depositors will have full access to their insured savings by Monday morning, March 13, 2023.
The FDIC will issue an advance dividend to uninsured depositors within the next week. Uninsured depositors will get a receivership certificate for the amount of their uninsured funds that remains. Future dividend payments to uninsured depositors may be provided as the FDIC sells Silicon Valley Bank’s assets.
The FDIC established the Deposit Insurance National Bank of Santa Clara to safeguard insured depositors (DINB). At the moment of closure, the FDIC, acting as receiver, promptly transferred all insured deposits of Silicon Valley Bank to the DINB.
The collapse of Silicon Valley Bank is due in part to the Federal Reserve’s aggressive interest rate rises over the last year.
Following years of interest rates hanging near zero, the Fed launched a series of historic rate rises last spring to make borrowing for businesses and individuals more costly – a tactic to cool the economy and bring inflation back into line.
Silicon Valley Bank had 17 locations in California and Massachusetts. Silicon Valley Bank’s main office and all branches will reopen on Monday, March 13, 2023.
Silicon Valley Bank’s usual business hours will be maintained by the DINB. Banking activities, including online banking and other services, will resume no later than Monday, March 13. Official checks from Silicon Valley Bank will continue to clear.
Silicon Valley Bank has around USD 209.0 billion in total assets and roughly USD 175.4 billion in total deposits as of December 31, 2022.
The quantity of deposits in excess of the insurance limitations was unknown at the time of closure. According to the statement, the amount of uninsured deposits will be determined once the FDIC collects further information from the bank and consumers.
Silicon Valley Bank is the year’s first FDIC-insured institution to collapse. Almena State Bank in Almena, Kansas, was the final FDIC-insured institution to shut on October 23, 2020.