United States regulators announced Friday that they shut down Silicon Valley Bank (SVB), one of the largest financial institutions in the country and a key lender to tech startups.
The move came after a run on the bank by concerned depositors.
The California Department of Financial Protection and Innovation (DFPI) "has taken possession of Silicon Valley Bank, citing inadequate liquidity and insolvency," the agency said.
Shares halted on Friday
The Federal Deposit Insurance Corporation (FDIC) — an agency created by Congress to maintain stability and public confidence in the US financial system — has been appointed receiver, according to a statement.
"All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023," the FDIC said.
Shares of the bank were halted on Friday after tumbling 66% in premarket trade.
Tech startups worried
SVB was the 16th-largest bank in the US and popular among tech companies and their workers.
Y Combinator, a startup incubator that has launched Airbnb, DoorDash and Dropbox and others, had referred hundreds of entrepreneurs to the bank.
"This is an extinction-level event for startups," Y Combinator CEO Garry Tan said, who said may startups could have trouble paying their staff.
"I literally have been hearing from hundreds of our founders asking for help on how they can get through this. They are asking, 'Do I have to furlough my workers?'"
A change of fortune
SVB appeared in a list of "America's best banks" in 2023, compiled by Forbes business magazine, where it came in at 20.
The FDIC said the bank is the first federally insured institution to fail since 2020. The regulator said that as of December 31, 2022, SVB had around $209.0 billion (€196 billion) in total assets and about $175.4 billion in total deposits.
"The debate today is whether SVB issues are SVB's issues or the start of a bigger issue for the banking sector," said Patrick O'Hare of Briefing.com.
Treasury Secretary Janet Yellen told lawmakers on Capitol Hill that her department was aware of developments and was monitoring the situation, calling it "a matter of concern" when banks experience losses, CNBC reported.
