Silicon Valley Bank Collapses: FDIC Takes Over and Assists Depositors
On Friday, March 10th, 2023, Silicon Valley Bank (SVB) was closed by regulators and taken over by the Federal Deposit Insurance Corporation (FDIC).[0] This marked the second-largest failure of a financial institution in US history, and sent shockwaves throughout the tech industry, which relied heavily on the bank for financing.[1]
Founded in 1983, Silicon Valley Bank provided financing for almost half of US venture-backed technology and health care companies.[2] The bank had been facing liquidity problems due to its exposure to risky loans and investments, as well as higher interest rates and dwindling venture capital.[2] SVB said earlier this week that it had to sell part of its bond holdings at a steep loss of $1.8 billion, leading to a bank run.[0] In the end, depositors withdrew more than $42 billion by the end of Thursday, setting the stage for the bank's collapse.[3]
The FDIC said all insured depositors will have full access to their insured deposits by no later than Monday morning.[4] It will also pay uninsured depositors an “advance dividend within the next week.”[5] Treasury Secretary Janet Yellen has ruled out a federal bailout for Silicon Valley Bank's investors, saying, “The reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.”[6] Yellen added that the American banking system is “really safe and well-capitalized” and that Americans can have confidence in the safety and soundness of the banking system.[7]
It is unclear what the future of Silicon Valley Bank will be, though the FDIC said it is likely considering a “range of available options” to stabilize the situation, which could include an acquisition by a foreign bank. In the meantime, the FDIC is offering assistance to depositors whose funds are insured and working to ensure that those with uninsured deposits are not left behind. This collapse has been a sobering reminder of the fragility of the banking system, and serves as a reminder that reforms put in place after the 2008 financial crisis must continue to be enforced.
0. “What to know about the spectacular collapse of Silicon Valley Bank” NPR, 10 Mar. 2023, https://www.npr.org/2023/03/10/1162599556/silicon-valley-bank-collapse-failure-fdic-regulators-run-on-bank
1. “Here's how much of your bank deposits are FDIC protected” The Washington Post, 11 Mar. 2023, https://www.washingtonpost.com/business/2023/03/10/faq-fdic-insurance
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. “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
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. “‘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
6. “Yellen rules out bailout for Silicon Valley Bank: “We're not going to do that again”” CBS News, 12 Mar. 2023, https://www.cbsnews.com/news/janet-yellen-silicon-valley-bank-bailout-face-the-nation-interview-today-2023-03-12/
7. “Yellen rules out bailout of Silicon Valley Bank” The Hill, 12 Mar. 2023, https://thehill.com/homenews/sunday-talk-shows/3896178-yellen-rules-out-bailout-of-silicon-valley-bank
