Yesterday, FinTelegram reported on the problems of SVB Financial Group, the owners of Silicon Valley Bank, a key player in the tech and venture capital community. SVB shares had collapsed against the backdrop of losses and acute capital needs at its bank. SVB faced a bank run and ran out of liquidity. On Friday, The U.S. FDIC took control of the company. Many startups will probably lose their funds.
Customers tried withdrawing $42 billion—about a quarter of the bank’s total deposits—on Thursday alone. The tsunami of withdrawals destroyed the institution’s liquidity; it had a negative cash balance of nearly $1 billion and couldn’t cover its outgoing payments at the Fed, WSJ reported. Thus, the Californian Department of Financial Protection and Innovation (DFPI) closed the bank Friday within hours and put it under the control of the FDIC. The Federal Deposit Insurance Corp (FDIC) took control of the bank via a new entity it created called the Deposit Insurance National Bank of Santa Clara. The regulator said the bank’s deposits had been transferred to the new bank.
The FDIC said insured depositors would have access to their funds by Monday morning. Depositors with funds exceeding insurance caps will receive receivership certificates for their uninsured balances. Businesses with big deposits stuck at the bank are unlikely to get their money out soon.
The bank is the 16th largest in the U.S., with some $209 billion in assets as of Dec. 31, according to the Federal Reserve. It is by far the biggest bank to fail since the near collapse of the financial system in 2008, second only to the crisis-era collapse of Washington Mutual Inc.
