FDIC Moves In to Protect Deposits as SBV Closes its Doors
Little more than a day after the severity of the company’s woes was made public, the Federal Deposit Insurance Corporation announced that the Silicon Valley Bank is getting shut down. FDIC is setting up the Deposit Insurance National Bank of Santa Clara in an effort to protect insured depositors.
FDIC Established Deposit Insurance National Bank of Santa Clara to Secure SVB Insured Deposits
On Friday, March 10th, the California Department of Financial Protection and Innovation shut down the embattled Silicon Vally Bank. The state regulators appointed the Federal Deposit Insurance Corporation as the receiver and the federal agency in turn set up the Deposit Insurance National Bank of Santa Clara in an effort to protect insured deposits. FDIC also stated that depositors will have full access to their funds on Monday, March 13th, at the latest:
All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.
Furthermore, the press release that the FDIC-established entity will maintain SVB’s business hours and that the main office and all branches will likewise be reopened on March 13th. At the time of the closure, the Silicon Valley Bank had 17 branches in Massachusetts and California. SVB is the first FDIC-insured organization to fail since Almena State Bank closed in 2020.
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The Staggering Downfall of SVB
Perhaps the most staggering, and worrying thing about SBV’s failure is the speed at which it unfolded. Just a few days earlier, on March 8th, the company revealed it is seeking to raise nearly $2 billion through a share sale in an effort to cover a $1.8 billion hole created in the sale of its unprofitable bond portfolio.
Between the market’s close on March 9th, and its opening on March 10th, SVB’s share price dropped 60% leading to a trading halt on Friday. Later on the same day, it was also reported that the Silicon Valley Bank tried and failed to find a buyer ultimately leading to its closure by state regulators.
Earlier in the same week, the crypto-friendly Silvergate ended its own rapid collapse as its parent company announced it would be winding down operations and liquidating the bank. Silvergate faced an onslaught of problems since the bankruptcy of one of its biggest partners, FTX, rocked the digital asset industry last November.
This is a breaking story and will be updated as new details emerge.
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