Silicon Valley bank: Silicon Valley bank closed by regulator as depositors withdraw cash
Silicon Valley Bank’s total assets were about $209 billion and total deposits were about $175.4 billion. February 31, 2022, according to a Reuters report.
Silicon Valley Bank’s head office and all branches will reopen on March 13, with all insured depositors having full access to their insured deposits no later than Monday morning, according to the announcement.
“The Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which has appointed the Federal Deposit Insurance Corporation (FDIC) as administrator,” the FDIC said in a statement.
Also read: ETtech Explainer: How Rising US Interest Rates Sparked a Tick Move at Silicon Valley Bank
The federal agency also said it had created the Santa Clara National Deposit Insurance Bank (DNIB). To protect insured depositors, the FDIC created the Santa Clara National Deposit Insurance Bank (DINB). At the time of closing, the FDIC, as a recipient, immediately transferred to DINB all insured deposits of Silicon Valley Bank, the FDIC added.
Discover stories that interest you
The startup-focused lender had 17 branches in California and Massachusetts.
Previously, SVB The Financial Group considered options, including a sale, after its attempts to raise capital through a share sale were unsuccessful.
SVB shares were halted on Friday after falling 66% in premarket trading.
The crisis at SVB began earlier this week when the bank, which heavily lends to tech startups, began selling shares to bolster its balance sheet after selling a portfolio of mostly US Treasuries at a loss.
On Wednesday, SVB Financial Group announced that it has raised $2.25 billion through a share sale, in addition to selling $21 billion in securities from its portfolio.
The bank also said it recorded a huge after-tax loss of $1.8 billion from the sale of these investments.
This led to concerns about solvency as the lender created a ripple effect for its customers withdrawing deposits.
According to a Wall Street Journal report, VCs advised startups to withdraw their deposits from SVB. Other major investors, including Peter Thiel’s Founders Fund and Coatue Management, have reportedly also instructed their portfolio companies to reduce their exposure to SVB.
Indian SaaS companies on the lookout
Bank crisis in Silicon Valley alarmed some Indian investors and founders running SaaS companies. with creditor accounts.
As the bank’s shares lost more than 60% of their value on Thursday, venture capital funds scrutinized domestic startups, especially those headquartered in the US, to see how much of their capital is in SVB Financial Group.
While late-stage SaaS (software as a service) firms of Indian origin, such as Zenoti, told ET they pulled out of SVB last year, early-stage SaaS firms are working with a troubled lender. Saurab Kumar, founder and early-stage CEO of Rezolve.ai, said the company is closely monitoring developments but has not yet disbursed all funds.
(According to Reuters)