Silicon Valley Bank Collapses After Devastating Bank Run
On Friday, March 10th, 2023, Silicon Valley Bank (SVB) collapsed after a devastating bank run last week. The California Department of Financial Protection and Innovation closed SVB and named the Federal Deposit Insurance Corporation (FDIC) as the receiver. The bank had 17 branches in California and Massachusetts, and was a major lender to the tech sector, with clients such as Airbnb, Stripe and Coinbase.
SVB shares plummeted by 60% on Thursday as worries mounted over the bank’s operation, netting traders who bet against the stock a one-day mark-to-market profit of roughly $513 million. The stock fell another 63% in premarket trading Friday before being halted, with the FDIC ultimately announcing that it had seized the bank.
The FDIC said those with insured deposits with SVB, typically up to $250,000, would be able to access their money by no later than Monday morning. Any amount above that will result in a “receivership certificate”.
The failure of Silicon Valley Bank was a shock to the entire financial industry, and had a ripple effect across the country, manifesting in a lot of fear nationwide. SVB had sold off $1.75 billion in shares to compensate for declining customer deposits and had sold $21 billion of bonds at a loss of $1.8 billion, all in an effort to shore up its liquidity but which essentially led to a run on the bank.
The bank was founded almost 40 years ago, and had become the go-to lender for tech startups that appeared too risky in the eyes of larger, more traditional banks. SVB's rapid descent into receivership forced companies to seek other banking partners — and funds — in order to stay operational.
The FDIC said that all insured depositors will have full access to their insured deposits no later than Monday morning. Uninsured depositors will receive an “advance dividend within the next week.” within the upcoming week. Investor Bill Ackman argued that the government has about 48 hours to fix the situation, and suggested that the only way to protect all depositors is if @jpmorgan @citi or @BankofAmerica acquires SVB before Monday, or the government guarantees all of SVB's deposits.
Silicon Valley Bank is the first FDIC–insured institution to fail this year, and the last bank failure of this size was in 2008.
0. “Washington officials express concern after collapse of Silicon Valley Bank” CBS News, 12 Mar. 2023, https://www.cbsnews.com/video/washington-officials-express-concern-after-collapse-of-silicon-valley-bank/
1. “Silicon Valley Bank had no official chief risk officer for 8 months while the VC market was spiraling” Fortune, 10 Mar. 2023, https://fortune.com/2023/03/10/silicon-valley-bank-chief-risk-officer
2. “Silicon Valley Bank – The Aftermath. Which Companies Were Impacted?” TipRanks, 12 Mar. 2023, https://www.tipranks.com/news/silicon-valley-bank-the-aftermath-of-the-closure-and-impacted-companies
3. “SVB Collapse Has Short Sellers Making $500M, Now they Have to Collect” Bloomberg, 10 Mar. 2023, https://www.bloomberg.com/news/articles/2023-03-10/shorts-make-500-million-on-svb-demise-collecting-won-t-be-easy
4. “Mark Cuban urges Fed to buy Silicon Valley Bank debt ‘immediately,’ says it’s ‘not the wealthy taking the hit’” Fortune, 11 Mar. 2023, https://fortune.com/2023/03/11/mark-cuban-fed-buy-silicon-valley-bank-debt-immediately-not-wealthy-taking-hit/
5. “Silicon Valley Bank failure could wipe out ‘a whole generation of startups'” NPR, 11 Mar. 2023, https://www.npr.org/2023/03/11/1162805718/silicon-valley-bank-failure-startups
6. “FDIC's Takeover of SVB Sparks Bank Runs, BoA & Wells Fargo Fears” TMZ, 11 Mar. 2023, https://www.tmz.com/2023/03/11/fdic-takeover-silicon-valley-bank-run-svb-boa-wells-fargo-deposit
7. “Silicon Valley Bank failure signals widespread risk amid high interest rates” Markets Insider, 11 Mar. 2023, https://markets.businessinsider.com/news/stocks/silicon-valley-bank-failure-collapse-interest-rate-hikes-financial-risks-2023-3
8. “‘There's going to be more': How Washington is bracing for bank fallout” POLITICO, 12 Mar. 2023, https://www.politico.com/news/2023/03/12/silicon-valley-bank-fallout-washington-00086662
9. “Investors implore the government to step in after Silicon Valley Bank failure” CNBC, 11 Mar. 2023, https://www.cnbc.com/2023/03/11/silicon-valley-bank-failure-has-investors-calling-for-government-aid.html
10. “PR-16-2023 3/10/2023” FDIC, 10 Mar. 2023, https://www.fdic.gov/news/press-releases/2023/pr23016.html