Silicon Valley Bank (SVB) has been shut down by regulators after its stock plunged by 60% on Thursday and 62% in premarket trading Friday due to mass customer withdrawals.
The Federal Deposit Insurance Corporation (FDIC) announced the California Department of Financial Protection and Innovation closed the bank and made the FDIC its receiver. (RELATED: Tech Giants Unveil Even More Layoffs As Bloated Sector Struggles)
BREAKING: U.S. government takes control of Silicon Valley Bankhttps://t.co/jnOYMzZgrl
— Axios (@axios) March 10, 2023
To protect SVB customers, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB) and transferred all insured customer deposits to the DINB. The FDIC issued up to $250,000 of insurance per deposit, per bank. The DINB will reopen Silicon Valley Bank’s offices on Mar. 13 and all banking activities will resume.
SVB was facing rapid outflows of customer deposits after the bank announced a $1.8 billion loss on asset sales on Wednesday due to rising interest rates, according to CNBC. Prominent venture capital funds encouraged companies to withdraw their deposits as the bank’s stock collapsed Thursday. The bank was in talks to sell itself after it failed to raise additional capital, the outlet reported.
In December 2022, SVB possessed $209.0 billion in total assets and $175.4 billion in total deposits, the FDIC said. The bank was one of the largest financial institutions in the U.S. and the biggest bank in Silicon Valley.
The collapse of SVB is the largest bank meltdown since Washington Mutual in 2008 and it will be felt across the tech industry. Big Tech firms have been laying off thousands of employees as interest rate hikes by the Federal Reserve and a more difficult economic climate take their toll on the industry.