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Within hours of reports that Silicon Valley Bank was considering a sale after it failed to raise enough money to keep going, state and federal banking regulators shut it down. In an announcement from the Federal Deposit Insurance Corporation (FDIC), the agency said, “All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023.”
Silicon Valley Bank is important for venture capital firms and startups. But as the economy has changed, VC-funded companies burned through their available cash. Simultaneously, VC funding dried up. So Silicon Valley Bank’s deposits dropped faster than the bank anticipated.
After Silicon Valley Bank announced on Wednesday that it had sold $21 billion in securities at a loss of $1.8 billion, along with a plan to sell $2.25 billion in new shares, many of its remaining customers moved quickly to shift their money elsewhere.
CNBC reporter David Faber said that while the company was seeking a sale this morning, the speed of deposits flowing out made any arrangement even more difficult. According to The Wall Street Journal, Goldman Sachs bankers had arranged a share sale on Thursday at $95 per share, but that deal fell apart as the price of the bank’s stock continued to fall and customers withdrew more of their funds.
A recent 10-K filing showed more than 90 percent of its deposits were uninsured, and the FDIC says today that “At the time of closing, the amount of deposits in excess of the insurance limits was undetermined.” Some companies who tried to pull money out on Thursday said they were having trouble making transfers, and there is concern over how this could affect some tech and biotech startups who still had their money deposited with the bank.
In closing the bank, the FDIC created a new entity, the Deposit Insurance National Bank of Santa Clara (DINB), and transferred all insured deposits there. Meanwhile, “Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds.”
This is all happening just two days after the crypto-friendly Silvergate Bank announced it would shut down and with stocks of several other banks also down sharply today.
