California banking regulators on Friday closed SVB Financial Group (SIVB.O), the largest bank failure since the financial crisis, moving quickly to protect depositors as a crisis at the startup-focused lender rippled through global markets and hit banking stocks. The regulator appointed the Federal Deposit Insurance Corporation (FDIC) as receiver, putting the tech-heavy lender into receivership and will dispose of its assets, according to a statement. Silicon Valley Bank is the first FDIC-insured institution to fail this year, the FDIC said. The last FDIC-insured institution to close was Almena State Bank, Almena, Kansas, on October 23, 2020. The main office and all branches of Silicon Valley Bank will reopen on March 13 and all insured depositors will have full access to their insured deposits no later than Monday morning, according to the FDIC statement.
reasury Secretary Janet Yellen told lawmakers on Capitol Hill Friday the department was aware of recent developments and was monitoring the situation, calling it "a matter of concern" when banks experience losses, according to CNBC. The FDIC said it would seek to sell SVB's assets and that future dividend payments may be made to uninsured depositors. The startup-focused lender scrambled this week to reassure its venture capital clients their money was safe after a capital raise led to its stock collapsing 60% and contributed to wiping out over $80 billion in value from bank shares. Shares of SVB were halted on Friday after tumbling as much as 66% in premarket trading. The rout in SVB's stock which began on Thursday spilled over into other U.S. and European banks, with the episode spreading concern about hidden risks in the sector and its vulnerability to the rising cost of money. But banking shares were well off their lows on Friday.
The problems at SVB underscore how a campaign by the U.S. Federal Reserve and other central banks to fight inflation by ending the era of cheap money is exposing vulnerabilities in the market. "Silicon Valley Bank is shedding light on vulnerabilities across the US banking sector, primarily in the bond holdings that many large institutions hold," said Karl Schamotta, Chief Market Strategist at Corpay. "Investors are fearing a repeat of 2008-style sort of dynamics, and this sell-off in the banking sector has raised fears of systemic risk." As higher interest rates caused the market for initial public offerings to shut down for many startups and made private fundraising more costly, some Silicon Valley Bank clients started pulling money out to meet their liquidity needs. This culminated in Silicon Valley Bank looking for ways this week to meet its customers' withdrawals. To fund the redemptions, SVB sold on Wednesday a $21 billion bond portfolio consisting mostly of U.S. Treasuries. SVB announced on Thursday it would sell $2.25 billion in common equity and preferred convertible stock to fill its funding hole.
https://www.reuters.com/business/financ ... 023-03-10/Sources familiar with the situation said on Thursday that some startups had advised their founders to pull out their money from SVB as a precautionary measure. Short sellers in SVB have profited by $717 million since Wednesday's close, according to analytics firm Ortex. “This is the first run on the bank that was potentially caused by Twitter,” said Eric Crowley, partner at GP Bullhound.
From the CA regulator:
https://dfpi.ca.gov/2023/03/10/californ ... lley-bank/The California Department of Financial Protection and Innovation (DFPI) announced today that, pursuant to California Financial Code section 592, it has taken possession of Silicon Valley Bank, citing inadequate liquidity and insolvency. The DFPI appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of Silicon Valley Bank.
Silicon Valley Bank is a state-chartered commercial bank based in Santa Clara and is a member of the Federal Reserve System, with total assets of approximately $209 billion and total deposits of approximately $175.4 billion as of Dec. 31, 2022. Its deposits are federally insured by the FDIC subject to applicable limits.