CNBC: Silicon Valley Bank is shut down by regulators in biggest bank failure since global financial crisis

Financial regulators have closed Silicon Valley Bankand taken control of its deposits, the Federal Deposit Insurance Corp. announced Friday, in what is the largest U.S. bank failure since the global financial crisis more than a decade ago.SourceMoneyGuru-https://www.mgkx.com/3722.html

The collapse of SVB, a key player in the tech and venture capital community, leaves companies and wealthy individuals largely unsure of what will happen to their money.SourceMoneyGuru-https://www.mgkx.com/3722.html

According to press releases from regulators, the California Department of Financial Protection and Innovation closed SVB and named the FDIC as the receiver. The FDIC in turn has created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB.SourceMoneyGuru-https://www.mgkx.com/3722.html

The FDIC said in the announcement that insured depositors will have access to their deposits no later than Monday morning. SVB’s branch offices will also reopen at that time, under the control of the regulator.SourceMoneyGuru-https://www.mgkx.com/3722.html

According to the press release, SVB’s official checks will continue to clear.SourceMoneyGuru-https://www.mgkx.com/3722.html

The FDIC’s standard insurance covers up to $250,000 per depositor, per bank, for each account ownership category. It is unclear exactly how larger accounts or credit lines for companies will be impacted by the closure. The FDIC said it will pay uninsured depositors an advanced dividend within the next week, with potential additional dividend payments as the regulator sells SVB’s assets.SourceMoneyGuru-https://www.mgkx.com/3722.html

As of the end of December, SVB had roughly $209 billion in total assets and $175.4 billion in total deposits, according to the press release. The FDIC said it was unclear what portion of those deposits were above the insurance limit.SourceMoneyGuru-https://www.mgkx.com/3722.html

The last U.S. bank failure of this size was Washington Mutual in 2008, which had $307 billion in assets.SourceMoneyGuru-https://www.mgkx.com/3722.html

Biggest bank failures since 2001

SVB was a major bank for venture-backed companies, which were already under pressure due to higher interest rates and a slowdown for initial public offerings that made it more difficult to raise additional cash.SourceMoneyGuru-https://www.mgkx.com/3722.html

The closure of SVB would impact not only the deposits, but also credit facilities and other forms of financing. The FDIC said loan customers of SVB should continue to make their payments as normal.SourceMoneyGuru-https://www.mgkx.com/3722.html

The move represents a rapid downfall for SVB. On Wednesday, the bank announced that it was looking to raise more than $2 billion in additional capital after suffering a $1.8 billion loss on asset sales.SourceMoneyGuru-https://www.mgkx.com/3722.html

The shares of parent company SVB Financial Group fell 60% on Thursday, and dropped another 60% in premarket trading on Friday before being halted.SourceMoneyGuru-https://www.mgkx.com/3722.html

CNBC’s David Faber reported Friday morning that the efforts to raise capital had failed and that SVB had pivoted toward a potential sale. However, a rapid outflow of deposits was complicating the sales process.SourceMoneyGuru-https://www.mgkx.com/3722.html

While many Wall Street analysts have argued that the struggles for SVB are unlikely to spread to the broader banking system, shares of other mid-sized and regional banks were under pressure on Friday.SourceMoneyGuru-https://www.mgkx.com/3722.html

Treasury Secretary Janet Yellen said during testimony to the House Ways and Means Committee on Friday morning that she was “monitoring very carefully” developments at a few banks. Yellen made her comments before the FDIC announcement.SourceMoneyGuru-https://www.mgkx.com/3722.html SourceMoneyGuru-https://www.mgkx.com/3722.html