California Department of Financial Protection and Innovation Shuts Down Silicon Valley Bank

On Friday morning, the California Department of Financial Protection and Innovation shut down Silicon Valley Bank (SVB) in what has become the largest American bank failure since the collapse of Washington Mutual in 2008.[0] This marks the second-largest bank failure in US history and comes at a time of financial upheaval for tech startups and investors.[1]

SVB, founded in 1983, was a Santa Clara-based bank that lent money to and took deposits from Silicon Valley tech startups.[2] It had long prided itself in its close relationship with tech entrepreneurs, calling itself the “financial partner of the innovation economy.”[3] At the conclusion of 2022, the bank asserted that almost half of all US startups with venture capital employed its services.[3]

The FDIC seized control of SVB and appointed the Deposit Insurance National Bank of Santa Clara as the receiver of all insured deposits of the bank.[4] It also said that customers will have full access to their insured deposits up to $250,000 by Monday morning.[3] However, many tech companies had much higher balances, and it’s not yet clear how much money they’ll be able to draw and when.[5]

The bank’s downfall began when it announced a capital raising on Wednesday night. Startup founders moved to withdraw funds on Thursday, rattled by the bank’s falling stock price.[6] This triggered a run on deposits, forcing the bank to sell its bonds at a loss.[7] The FDIC said that as they sell the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.[8]

The FDIC and the Deposit Insurance National Bank of Santa Clara are now aiming to find buyers for the firm’s various businesses in order to return as much of clients’ money as possible.[9] The tech industry, in particular, is keeping an eye on the situation, as SVB had become known as the “go-to lender” for those deemed too risky by larger, more traditional banks. Washington Mutual holds the record for the largest bank failure in US history, with approximately $300 billion in customer deposits before the 2008 financial crisis.[3]

0. “After Silicon Valley Bank Fails, Tech Startups Race to Meet Payroll” The Wall Street Journal, 10 Mar. 2023,

1. “Takeaways from America's second-largest bank failure” CNN, 11 Mar. 2023,

2. “Silicon Valley Bank: What you need to know as the crisis sparks stock market chaos” Markets Insider, 10 Mar. 2023,

3. “Most of Silicon Valley Bank's Deposits Were Uninsured” TIME, 10 Mar. 2023,

4. “Opinion | And Now for a Little Bank Panic” The Wall Street Journal, 10 Mar. 2023,

5. “How SVB’s collapse could impact its customers' deposits” Axios, 9 Mar. 2023,

6. “Elon Musk is ‘open' to buying SVB, Tesla investor says ‘no thanks'” Business Insider, 11 Mar. 2023,

7. “‘This hit like a ton of bricks': Troubles at Silicon Valley Bank ripple across Boston tech scene” The Boston Globe, 11 Mar. 2023,

8. “Companies scramble to meet payroll, pay bills after SVB's swift failure” CNBC, 10 Mar. 2023,

9. “SVB (SVIB) Failure: What Will Silicon Valley Bank Sell?” Bloomberg, 11 Mar. 2023,

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