Silicon Valley Bank Shut Down by FDIC: All Deposits Accessible by Monday
This week, Silicon Valley Bank, the 17th-largest bank in the US, faced a sudden collapse and was shut down by federal regulators on Friday morning after a bank run and capital crisis.[0] The shutdown of the California bank, which catered to tech startups and venture-capital firms, marks the largest bank failure since the 2008 recession and the second-largest in US history.[1]
The Federal Deposit Insurance Corporation (FDIC) is covering up to $250,000 per depositor, and depositors may be able to access their funds as early as Monday.[2] However, 96 percent of deposits at SVB are not insured due to the $250,000 limit per account owner per bank, and many of the bank’s customers had balances well exceeding that threshold.[3]
The Treasury Department, Federal Reserve, and FDIC have jointly announced that all depositors of Silicon Valley Bank will have access to their money starting Monday, indicating that uninsured deposits may be returned.[4] Analysts have largely dismissed the notion that SVB’s woes mark a systemic problem in the banking system, instead attributing it to poor balance-sheet management.[1]
The bank’s demise was triggered by a mismatch between assets and liabilities, as well as the Federal Reserve’s aggressive rate hikes roughly a year ago, which dried up funding sources for tech startups and put pressure on deposits.[1] SVB’s parent company, SVB Financial Group, tried to raise money by selling shares, then tried to sell itself, but it was too late.[5]
The FDIC has said that all insured depositors will have full access to their insured deposits no later than Monday morning.[6] Treasury Secretary Janet Yellen reassured the public that the US banking system remains resilient, noting that reforms implemented after the 2008 financial crisis have ensured better safeguards for the banking industry.[0]
SVB’s share price plunged by 60% on Thursday and another 63% in premarket trading on Friday before being halted.[7] Traders who bet against the stock made a one-day mark-to-market profit of roughly $513 million.[7] The FDIC is now in control of the bank’s assets, and customers will likely get more money as the agency sells off SVB’s assets.[3] There is also a chance that all depositors will get their money back, as losses would be borne first by creditors to the bank.[3]
0. “Fallout from Silicon Valley Bank collapse to dominate Capitol Hill” The Hill, 13 Mar. 2023, https://thehill.com/homenews/senate/3896695-fallout-from-silicon-valley-bank-collapse-to-dominate-capitol-hill/
1. “What a rescue for SVB depositors means for the stock market and interest rates” MarketWatch, 12 Mar. 2023, https://www.marketwatch.com/story/svb-collapse-means-more-stock-market-volatility-what-investors-need-to-know-b87c962b
2. “Treasury Secretary Janet Yellen says U.S. government won't bail out Silicon Valley Bank” CNBC, 12 Mar. 2023, https://www.cnbc.com/2023/03/12/treasury-secretary-janet-yellen-says-us-government-wont-bail-out-silicon-valley-bank.html
3. “‘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
4. “Silicon Valley Bank CEO should return millions in company stock he sold, lawmakers say” The Washington Post, 12 Mar. 2023, https://www.washingtonpost.com/technology/2023/03/12/greg-becker-svb-stock/
5. “What is Silicon Valley Bank? The bank’s collapse, explained.” Vox.com, 10 Mar. 2023, https://www.vox.com/technology/23634433/silicon-valley-bank-collapse-silvergate-first-republic-fdic
6. “PR-16-2023 3/10/2023” FDIC, 13 Mar. 2023, https://www.fdic.gov/news/press-releases/2023/pr23016.html
7. “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
