Silicon Valley Bank (SVB), a major US lender for venture capital-backed companies, specifically for tech was seized by California banking regulators on Friday. The Federal Deposit Insurance Corporation (FDIC) in its order said that the move is aimed “to protect insured depositors.”

The closing of SVB is seen as the largest bank failure since Washington Mutual during the height of the 2008 financial crisis.

According to a report by Associated Press, the bank failed after depositors— mostly technology workers and venture capital-backed companies, began withdrawing their money creating a run on the bank.

Notably, the SVB was the 16th largest US Bank by assets, specializing in financing start-ups. The shutdown, therefore, has dealt a massive blow to upcoming companies.

The FDIC ordered the closure of Silicon Valley Bank and immediately took the position of all deposits at the bank Friday. FDIC in its order said, “To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank.”

"All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors," California banking regulators added.

According to the FDIC, as of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits.

Image courtesy: Reuters