The Federal Deposit Insurance Corporation (FDIC) shut down Silicon Valley Bank on Friday, making it the largest bank failure since Washington Mutual during the 2008 financial crisis. The bank had been experiencing a run on deposits as tech workers and venture capital-backed companies had begun to withdraw their money. Silicon Valley Bank held $209 billion in assets and $175.4 billion in deposits, with many of them above the $250,000 insurance limit. The FDIC did not announce a buyer for the bank’s assets and seized them in the middle of the business day, a sign of how bad the situation had become.
Silicon Valley Bank had been exposed to the tech industry and the majority of their clients were venture capital-backed companies. In order to strengthen its capital position, the bank had announced plans to raise up to $1.75 billion, but the attempts had failed. As a result, the bank was looking to sell itself and was also being advised to pull at least two months’ worth of “burn” cash out of their accounts.
The news of Silicon Valley Bank’s failure had a ripple effect in the banking sector. Major banks like Bank of America and JPMorgan had pulled out of an early slump due to data released Friday by the Labor Department, but regional banks, particularly those with heavy exposure to the tech industry, were in decline. Shares of major banks were down this week between 7% and 12%.
In conclusion, the closure of Silicon Valley Bank marks the largest bank failure since Washington Mutual during the height of the 2008 financial crisis. The bank had $209 billion in assets and $175.4 billion in deposits, many of which were above the $250,000 insurance limit. The FDIC seized the bank’s assets in the middle of the business day as attempts to raise capital had failed and the bank was now looking to sell itself. The news of the failure had a ripple effect in the banking sector, with major banks’ shares down between 7% and 12%.
Key Points:
• The FDIC seized the assets of Silicon Valley Bank on Friday, making it the largest bank failure since Washington Mutual during the 2008 financial crisis.
• Silicon Valley Bank had $209 billion in assets and $175.4 billion in deposits, many of which were above the $250,000 insurance limit.
• The FDIC seized the bank’s assets in the middle of the business day as attempts to raise capital had failed and the bank was now looking to sell itself.
• The news of the failure had a ripple effect in the banking sector, with major banks’ shares down between 7% and 12%.
