State Regulator Closes Silicon Valley Bank and Appoints FDIC Receiver
Silicon Valley Bank has been taken over and closed by a state financial regulator.
The California Department of Financial Protection and Innovation (DFPI) took possession of the bank and appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver Friday (March 10), the DFPI said in a Friday press release.
The state regulator cited Silicon Valley Bank’s “inadequate liquidity and solvency” in the press release.
“Silicon Valley Bank is a state-chartered commercial bank and member of the Federal Reserve System based in Santa Clara, with total assets of approximately $209 billion and total deposits of approximately $175.4 billion as of Dec. 31, 2022,” the DFPI said in the release. “Its deposits are federally insured by the FDIC subject to applicable limits.”
To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB) and, upon the Friday closing of Silicon Valley Bank, immediately transferred all insured deposits of that bank to DINB, the FDIC said in a Friday press release.
“All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023,” the FDIC said in the release. “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.”
The main office and all branches of the bank will reopen on Monday (March 13), the DINB will keep the normal business hours that were kept by Silicon Valley Bank, and online banking and other services will resume no later than Monday, according to the FDIC press release.
FDIC also said in the release that, as the receiver, it would retain the bank’s assets for later disposition. Customers with accounts over $250,000 should contact the FDIC, and loan customers should continue making payments.
These moves come shortly after the share trading of Silicon Valley Bank’s parent company, SVB Financial Group, was halted after a 68% premarket plunge and after it was reported that SVB had ended its plan to raise capital and was looking to sell.
Customer withdrawals and plummeting stock prices have beset SVB and its Silicon Valley Bank in recent days after SVB incurred a $1.8 billion after-tax loss on the sale of its investments and some investors grew concerned about its liquidity.
Silicon Valley Bank is the first FDIC-insured institution to fail since Almena State Bank, Almena, Kansas, failed in October 2020, according to the FDIC press release.