Silicon Valley Bank collapsed into Federal Deposit Insurance Corp. receivership on Friday, after its long-established customer base of tech startups grew worried and yanked deposits.
The California Department of Financial Protection and Innovation said in a statement Friday that it has taken possession of Silicon Valley Bank and appointed the FDIC as receiver, citing inadequate liquidity and insolvency.
The FDIC said that insured depositors would have access to their funds by no later than Monday morning. Uninsured depositors will get a receivership certificate for the remaining amount of their uninsured funds, the regulator said, adding that it doesn’t yet know the amount. In announcing the takeover, the California Department of Financial Protection and Innovation cited inadequate liquidity and insolvency.
Problems mounted for the bank, known as SVB, in March after Peter Thiel’s Founders Fund and other high-profile venture capital firms advised their portfolio companies to pull money from the bank. That advice came a day after SVB Financial Group, the bank’s parent company, announced it would try to raise more than $2 billion following a significant loss on its portfolio.
Receivership typically means a bank’s deposits will be assumed by another, healthy bank or the FDIC will pay depositors up to the insured limit.
“The FDIC receivership will end the uncertainty about this particular bank,” said Saule Omarova, a law professor at Cornell University. “But I don’t think that necessarily itself stops people from feeling less safe if they have some kind of exposure to assets or they hold their own money in banks with similar risk profiles.
“Bank runs are a lot about psychology. And at this point, it’s very rational to be nervous,” she added.
SVB was founded in 1983 over a poker game between Bill Biggerstaff and Robert Medearis, according to a statement from the bank’s 20th anniversary. Since its start, the firm has specialized in providing financial services to tech startups.
The bank had about $209 billion in total assets and about $175.4 billion in total deposits at the end of last year, the FDIC said. “At the time of closing, the amount of deposits in excess of the insurance limits was undetermined,” the regulator said.
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