(10 March 2023 – United States) The abrupt collapse of Silicon Valley Bank (SVB) with US$209 billion in assets under management (AUM) makes it the second-largest bank failure in US history.
In a rushed attempt to meet SVB customers widescale withdrawals, to fund the redemptions SVB sold a US$21 billion bond portfolio consisting mostly of US Treasuries. SVB announced on Thursday it would sell $2.25 billion in common equity and preferred convertible stock to fill its funding hole.
The bank and its 17 branches were closed by the California Department of Financial Protection and Innovation. The agency appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.
New York-based Signature Bank has also appointed the FDIC as receiver, the second bank failure this week. Signature Bank had deposits totaling approximately US$88.59 billion as of December 31
The US Federal Reserve issued a joint pair of statements on Sunday asserting Silicon Valley Bank’s depositors, both insured and uninsured, will receive support in a manner that will “fully protect” all. The Federal Reserve also said Sunday it would make additional funding available through a new Bank Term Funding Program, which would offer loans up to one year to depository institutions, backed by Treasuries and other assets these institutions hold.
“Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.” The Fed said in the statement.
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the US banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”