The California Department of Financial Protection and Innovation closed Silicon Valley Bank (SVB). The American regulator – the Federal Deposit Insurance Corporation (FDIC) – will now manage all the bank’s operations.
To protect clients, the FDIC created the Santa Clara National Deposit Insurance Bank (DINB) and transferred SVB deposits to this new entity. Insured depositors will reportedly have access to their funds on Monday.
The 16th largest U.S. bank went bust after depositors worried about the bank’s balance sheet – mainly tech and venture capital firms – decided to withdraw their money this week. SVB has been called the tech bank because its clients were mostly Silicon Valley startups. Popular cryptocurrency companies also kept their funds there.
As early as Friday, some experts believed that the bank would be able to extricate itself from material problems. The bank’s management tried to raise capital and find additional investors. However, trading in SVB shares was suspended even before the start of the trading session on Wall Street – in the morning, the company’s shares fell by 62%.
SVB was founded in 1983 and, as of the end of 2022, had about $209 billion in total assets and about $175.4 billion in total deposits. Analysts call it the biggest crash in the banking industry since 2008.
The other day, another major financial counterparty, Silvergate, announced liquidation. He dragged the entire market down with him, so venture capitalists panicked.
Silvergate Bank has held an important place in the digital asset ecosystem and has been the main regulated banking partner for hundreds of crypto companies around the world, and especially in the US. The experts explained that the bank had one weakness: its deposits were not really deposits in the usual sense. They were more like money flows going through a money transfer company like MoneyGram International or Western Union. As soon as the flow of money dried up, the crypto bank stopped earning.
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