Silicon Valley Bank, a major financial institution for venture-backed companies, was shut down by California’s financial watchdog on March 10 — marking the first Federal Deposit Insurance Corporation-insured bank to fail in 2023.
The California Department of Financial Protection and Innovation confirmed that Silicon Valley Bank was ordered to close but did not specify the reason for the shutdown. The California regulator appointed the FDIC as the receiver to protect insured deposits.
Depositors “will have full access to their insured deposits no later than Monday morning, March 13, 2023,” read the official statement. The regulator explained that uninsured depositors would be given a “receivership certificate for the remaining amount of their uninsured funds” and entitled to future dividend payments once the FDIC sells all Silicon Valley Bank assets.
Customers lining up outside of Silicon Valley Bank at its Menlo Park, CA branch. pic.twitter.com/SDNrSUC1C0
— Cointelegraph (@Cointelegraph) March 10, 2023
Silicon Valley Bank, which is also known as SVB, operated 17 branches across California and Massachusetts. All branches and the main office will be open on March 13 to facilitate depositor access.
SVB is one of the United States’ 20 largest banks by total assets. The bank provided financial services to several crypto-focused venture firms, including Andreessen Horowitz and Sequoia.
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The bank’s downfall was swift, coming less than 48 hours after management disclosed that they needed to raise $2.25 billion in stock to shore up operations. The announcement was part of SVB’s mid-quarter financial update, where it disclosed the sale of $21 billion in securities at a $1.8 billion loss.
Trading in SVB stock (SIVB) was halted on March 9 due to extreme volatility. The stock’s 60% drop was the biggest single-day wipeout in history, according to The Wall Street Journal.
The failure of Silicon Valley Bank prompted a flurry of commentary from businesses and policymakers. Congresswoman Maxine Waters, the top Democrat on the House Financial Services Committee, said, "I am alarmed by the failure of Silicon Valley Bank, which marks the second largest bank failure in U.S. history." She added:
"I am closely monitoring and convening Committee members with regulators so myself and members can understand the latest around the closure of Silicon Valley Bank (SVB) by the California Department of Financial Protection and Innovation (DFPI), and the Federal Deposit Insurance Corporation (FDIC) appointed as receiver."