FDIC closes Silicon Valley Bank
Silicon Valley Bank is important to venture capital firms and startups. But as the economy changed, VC-funded companies burned their available cash. At the same time, VC funding dried up. So Silicon Valley Bank’s deposits fell faster than the bank expected.
After Silicon Valley Bank announced Wednesday that it had sold $21 billion in securities for a $1.8 billion loss, along with a plan to sell $2.25 billion in new stock, many of its remaining clients quickly moved to shift their money elsewhere.
CNBC reporter David Faber said while the company was looking for a sale this morning, the speed of deposit outflows made any settlement even more difficult. According to The Wall Street Journal, Goldman Sachs bankers had arranged a stock sale for $95 a share on Thursday, but that deal fell apart as the price of the bank’s stock continued to fall and customers withdrew more of their money.
A recent 10-K filing showed that more than 90 percent of deposits were uninsured, and the FDIC says today that “at the time of closing, the amount of deposits that exceeded insurance limits was undetermined.” Some companies trying to raise money on Thursday said they were having trouble making transfers, and there are concerns about how this could affect some tech and biotech startups that still had their money in the bank .
By closing the bank, the FDIC created a new entity, the Deposit Insurance National Bank of Santa Clara (DINB), and transferred all insured deposits there. Meanwhile, “uninsured depositors will receive a certificate of trusteeship for the remaining amount of their uninsured funds.”