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.[0] The California Department of Financial Protection and Innovation closed SVB and named the Federal Deposit Insurance Corporation (FDIC) as the receiver.[1] 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.[2]
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.[3] The stock fell another 63% in premarket trading Friday before being halted, with the FDIC ultimately announcing that it had seized the bank.[3]
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.[4] Any amount above that will result in a “receivership certificate”.[5]
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.[6] 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.[7]
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.[8]
The FDIC said that all insured depositors will have full access to their insured deposits no later than Monday morning.[4] Uninsured depositors will receive an “advance dividend within the next week.” within the upcoming week.[8] 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.[9]
Silicon Valley Bank is the first FDIC–insured institution to fail this year, and the last bank failure of this size was in 2008.[10]
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
