(AmericanProsperity.com) – California regulators shut down Silicon Valley Bank (SVB) on Friday morning after its stock crashed by 62 percent in premarket trading because of customer withdrawals and fears of a massive crisis across the US banking industry. The California Department of Financial Protection and Innovation decided to put the tech lender under the control of the Federal Deposit Insurance Corporation (FDIC), which is an independent government agency that oversees financial institutions and insures bank deposits.
The FDIC acts as a receiver that can liquidate the SVB’s assets to pay back its clients, including creditors and depositors. To protect the bank’s customers, the agency announced it created the Deposit Insurance National Bank of Santa Clara (DINB) and managed to transfer every insured customer deposit to it. The agency also said it provided insurance of up to $250,000 for each deposit made at a bank, and that every single insured depositor will have access to their deposits by Monday morning at the latest. Moreover, the agency pointed out that the DINB will reopen its offices in Silicon Valley on March 13th.
As reported by CNBC, the tech lender was experiencing a massive outflow of client deposits after it reported a loss of $1.8 billion from selling assets on Wednesday, which the bank attributed to the significant increase in interest rates. On Thursday morning, the bank’s stock started to collapse and some of the most important venture capital funds in the country started to encourage companies to take back their deposits as soon as possible.
The Silicon Valley tech lender mainly served high-risk startups that have been hurt by a decrease in venture capital and higher interest rates. The SVB collaborated with nearly 50% of every single healthcare and tech company that received funding from venture capitalists in the country.
While it was a not-so-famous player outside of Silicon Valley, the tech lender was among the top 20 commercial banks in the United States. According to the FDIC, the SVB possessed $175 billion in total deposits and $209 billion in total assets by December 2022.
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