FDIC Assumes Control of Silicon Valley Bank

California-based Silicon Valley Bank (SVB) has been taken over by the Federal Deposit Insurance Corporation (FDIC) after a run on the bank saw customers seek to withdraw $42 billion.

The California Department of Financial Protection and Innovation moved to shut down SVB on March 10. The FDIC was appointed as receiver and has transferred all insured deposits to the newly created Deposit Insurance National Bank of Santa Clara (DINB).

SVB is the first bank to fail since Almena State Bank in October 2020, and the largest since the 2007-09 financial crisis, according to Reuters.

Last week, SVB announced a $1.8 billion loss from the sale of US Treasury bonds and mortgaged-backed securities. This was followed by a planned capital raise on equity markets.

However, according to the California Department of Financial Protection and Innovation, investors and depositors sought to withdraw a combined $42 billion from the bank on March 9 alone. This was despite the bank previously being “in sound financial condition”, the department said.

“Despite attempts from the bank, with the assistance of regulators, to transfer collateral from various sources, the bank did not meet its cash letter with the Federal Reserve,” the department’s regulatory notice said. “The precipitous deposit withdrawal has caused the bank to be incapable of paying its obligations as they come due, and the bank is now insolvent.”

Deposit customers will be given access to their accounts “no later than Monday morning, March 13, 2023”, the FDIC said in a statement.

Uninsured depositors will receive an “advance dividend” from the FDIC, with further payments made subject to future asset sales as SVB is wound up.

DINB will maintain normal opening hours for SVB’s 17 branches across California and Massachusetts, the FDIC said, beginning today (March 13).

At the end of 2022, the bank had total assets worth approximately $209 billion and total deposits worth $175.4 billion.