Key points to remember
- Silicon Valley Bank was shut down by the California Department of Financial Protection.
- Trading of several regional banks, including cryptocurrency-enabled Signature Bank, was halted after their shares experienced high volatility.
- Silicon Valley Bank announced Wednesday that it has taken extraordinary steps to shore up its finances.
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Silicon Valley Bank, the 18th largest bank in the United States by total assets, was shut down by regulators today after suffering a bank run.
The biggest bank failure since the Great Recession
The banking sector is taking a hit.
Early Friday, the California Department of Financial Protection and Innovation announcement the closing of Silicon Valley Bank. All FDIC-insured deposits were transferred from SVB to the National Deposit Insurance Bank of Santa Clara. The FDIC said all insured depositors would have full access to their insured deposits by March 13, while uninsured depositors would receive certificates for their uninsured fund amounts.
Trading in several regional bank stocks – including SVB, Signature Bank, First Republic Bank, PacWest Bancorp and Western Alliance Bancorp – had already been halted following news of Silicon Valley Bank’s liquidity problems.
At the time of writing, SVB was down 67% on the weekly, Signature Bank down 27%, First Republic down 30%, PacWest Bancorp down 37% and Western Alliance down 29%.
Silicon Valley Bank unexpectedly announced on Wednesday that it was taking extraordinary and immediate steps to shore up its finances. The bank revealed that it had sold $21 billion of its most liquid assets, borrowed $15 billion and attempted to raise funds by staging a fire sale of its shares.
The news sparked a wave of withdrawals on Thursday as tech startups – which make up the overwhelming majority of the bank’s customers – sought to move their funds to a safer place. According CNBC, SVB Financial (parent company of Silicon Valley Bank), having failed to raise enough capital to consolidate its operations, then began looking to sell itself. At the time of its closure, Silicon Valley Bank was the 18th largest bank in the United States by total assets.
Disclosure: At the time of writing this article, the author of this article owned BTC, ETH, and several other crypto assets.