US banking regulators on Friday issued an immediate notice on Friday, stating that Silicon Valley Bank, one of the country’s largest banks, has its operations shut down by Californian authorities, and the bank’s assets have been seized and taken over by the country’s Federal Deposit Insurance Corporation (FDIC).
Silicon Valley Bank (SVB) was a commercial bank headquartered in Santa Clara, California. The bank’s customers and depositors are mostly consisted of technology workers in the US, tech startups in Silicon Valley and venture capital-backed companies. The bank used to operate from 29 offices in the United States and from offices in India, the United Kingdom, Israel, Canada, China, Germany, Hong Kong, Ireland, Denmark, and Sweden.
As reported by CNBC, the Silicon Valley Bank bank run is the largest US bank failure since the 2008 global financial crisis that happened more than a decade ago. The interference from regulators comes shortly after the shares of SVB were halted on Friday after tumbling as much as 66% in premarket trading.
FDIC, the organisation tasked to handle the bank’s closure, has stated that it has created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB. The press release also mentions SVB’s official cheques will continue to clear. The main office in Santa Clara and all branches of Silicon Valley Bank will reopen on March 13 Monday and all insured depositors will have full access to their insured deposits no later than Monday morning.
For context, the FDIC’s standard insurance covers up to $250,000 per depositor, per bank, for each account ownership category. It is unclear exactly how larger accounts or credit lines for companies will be impacted by the closure.
The FDIC said it would seek to liquidate SVB’s assets and that future dividend payments may be made to uninsured depositors. Uninsured depositors will be receiving an advanced dividend within the next week, with potential additional dividend payments as the regulator gradually sells SVB’s assets.
CNBC reports that the closure of SVB would impact not only the deposits but also credit facilities and other forms of financing. The FDIC said loan customers of SVB should continue to make their payments as normal.
United States of America Treasury Secretary Janet Yellen said during testimony to the House Ways and Means Committee on Friday morning that she was “monitoring very carefully” developments at a few banks in the country. Yellen made her comments before the FDIC took over SVB.
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