Silicon Valley Bank was closed Friday morning by regulators in California and placed under the control of the U.S. Federal Deposit Insurance Corporation.
U.S. officials shut down Silicon Valley Bank on Friday to protect customer deposits and plan to reopen the institution on Monday under federal control, saying the financial institution’s problems will contagion to other countries. Amid fears, official sources reported. sector bank.
Working with the technology sector, the bank was alarmingly short on liquidity.
The California Department of Financial Protection and Innovation (DFPI) has closed the SVB and designated the Federal Deposit Insurance Corporation (FDIC) as the custodian of bank funds, federal agencies reported Friday.
DPFI “acquired Silicon Valley Bank due to insufficient liquidity and insolvency,” the California agency said.
The bank’s 17 branches will reopen Monday under the control of a new organization specially created by the FDIC to manage the agency’s operations.
In the short term, customers can withdraw up to $250,000. Clients with the most money in their banks – the majority – were invited to contact the FDIC.
SVB was the first financial institution to have deposits insured by a federal corporation since 2020, according to the FDIC.
The situation has raised concerns among investors that other banks could face problems as the central bank hikes interest rates to curb inflation.
Silicon Valley Bank (SVB) is a California bank that specializes in the technology sector, primarily with funds that invest in privately held companies.
Little known to the public, it was the 16th largest bank in the United States by assets.
With operations in the US, Europe, Asia and Israel, the company provided financial services to startups and others, from simple bank accounts to capitalization advice.
SVB, which has close ties to tech companies, has been plagued by a deterioration in the sector. A sharp rise in interest rates in the United States has affected branches that rely heavily on financing for growth, and along with semiconductor supply difficulties and a decline in appetite, the number of investors in technology stocks has , marking the end of post-pandemic technology euphoria.
Panic erupted after the bank’s parent, SVB Financial Group, announced it would attempt to raise $2.25 billion in new funding.
The group quickly sold a portfolio of $21 billion in financial securities for an estimated loss of $1.8 billion.
SVB was looking to strengthen its finances, which had been weakened by customer exits.
According to CNBC, the bank was unable to obtain the required capital and was negotiating a sale to another bank prior to the announcement by U.S. regulators.
SVB’s troubles stretched across borders and stunned the global banking industry.
At the end of 2022, banks had $209 billion in assets and about $175.4 billion in deposits, according to authorities.
Treasury Secretary Janet Yellen said this Friday, ahead of the entity’s closure, that “if a bank suffers financial losses, it is a matter of concern and a matter of concern.”
The big four US banks lost $52 billion in the stock market on Thursday, and the move also hit Asian and European banks, with their market capitalizations dropping significantly.
SVB’s troubles almost coincided with Wednesday night’s announcement of the liquidation of Silvergate Bank, a bank particularly active in the troubled cryptocurrency sector.
Since the financial crisis of 2008-2009 and the collapse of Lehman Brothers, banks have been regularly stress tested and need to assure regulators of their ability to respond to stressful situations.