In a broader signal of the deepening crisis in the banking sector amid economic uncertainty, Silicon Valley Bank is closing its business. In today’s USA News, the CDFPI (California Department of Financial Protection and Innovation) said it is taking over Silicon Valley Bank and shutting down its operations to save deposits. The investors raised their eyebrows after Silicon Valley Bank sold securities worth $21 billion. It also proposed to sell shares to generate over $1 billion for general corporate needs. The investors, who lost confidence in the bank, started withdrawing their money.
The FDIC will ensure the availability of insured funds by Monday
According to a communiqué released on Friday by the CDFPI, the FDIC (Federal Deposit Insurance Corporation) will receive the Silicon Valley Bank, which is a separate entity established for this purpose. The FDIC will ensure the availability of all insured deposits at Silicon Valley Bank by Monday morning.
Silicon Valley Bank, which is based in Santa Clara, California, is the 16th largest bank in the US. It is the biggest bank closure in the US since the financial crisis erupted in 2008. According to the data available with the FDIC, Washington Mutual, the second largest bank, collapsed in 2008 because of the meltdown across the industry.
Silicon Valley Bank holds assets worth $209 billion
Silicon Valley Bank holds assets of $209 billion and deposits worth more than $175 billion as of December 2022. It is a member of the FDIC. Each depositor in this bank is insured for up to $250,000. It needs to be worked out to find out how many deposits exceed this limit. The FDIC will work during the weekend to know exactly how many deposits cross this threshold.
The depositors, who have not insured their deposits, will be paid an advance dividend. They will also get a receivership certificate for the balance of their uninsured amount. The agency said the uninsured depositors may also get payments in the future after the FDIC disposes of the assets of Silicon Valley Bank.
Silicon Valley Bank declined by 60% on Thursday
The trading of Silicon Valley Bank shares halted after they slipped by double digits before the opening hours of the market on Friday, and it resulted in the closing of the 16th largest bank in the US. Its shares already declined by 60% on Thursday.
The worries over the closure of Silicon Valley Bank have caused investors on Wall Street to dump stocks of other banks. The stocks of prominent lenders on the West Coast, such as Western Alliance Bancorporation, PacWest Bancorp, and First Republic Bank, declined sharply on Friday.
In today’s breaking news headlines, several customers began queuing outside the offices of Silicon Valley Bank on Park Avenue to withdraw their money. The bank even called the police officers on Friday morning from the New York Police Department. Officers who visited the premises left the scene after finding nothing criminal.
Janet Yellen, the treasury secretary, updated the lawmakers on Friday about the recent developments concerning the banks and how she was monitoring the situation carefully. She went on to say that it is a matter of concern when banks face financial losses. In a filing to the SEC on Friday, First Republic reiterated its commitment to stability and safety and maintained liquidity positions and strong capital.