US regulators took swift action to seize the assets of Silicon Valley Bank on Friday, marking the largest bank failure since the height of the financial crisis more than a decade ago. The bank, which was heavily exposed to the tech industry, failed after its depositors, mostly technology workers and venture capital-backed companies, rushed to withdraw their money amid growing anxiety over the bank’s health. The failure has sent shockwaves through the financial sector, with shares of major banks plummeting.
The FDIC created the Deposit Insurance National Bank of Santa Clara to protect insured depositors of Silicon Valley Bank, which was closed by state bank regulators in California. The bank’s failure came with incredible speed, with executives trying to raise capital and find additional investors on Friday. However, trading in the bank’s shares was halted due to extreme volatility.
The FDIC moved to shutter the bank shortly before noon Eastern time, signaling how quickly depositors had cashed out. The agency could not immediately find a buyer for the bank’s assets, highlighting the speed of the bank’s collapse. The White House assured the public that the banking system is much healthier than it was during the Great Recession, citing reforms put in place a decade ago.
Silicon Valley Bank
Silicon Valley Bank’s assets totaled 209 billion US dollars, with much of its deposits exceeding the 250,000 dollar insurance limit. It is unclear how much of the deposits were above the insurance limit at the time of failure. The FDIC said deposits below the 250,000 dollar limit would be available on Monday morning. The bank’s failure is likely to have a significant impact on the tech industry, which was heavily dependent on the bank.
The sudden collapse of Silicon Valley Bank raises questions about the stability of the banking system. While the failure is not expected to disrupt the broader financial system, it is a stark reminder of the fragility of the banking sector. As the FDIC endeavors to protect depositors and unwind the bank’s assets, one thing is certain: the banking system is no longer the same as it was during the Great Recession. The regulatory actions taken on Friday demonstrate a commitment to maintaining stability, but the consequences of this monumental failure are still unknown.
