FDIC closes Silicon Valley Bank after bank fails to raise new capital

[progree]

Last edited Fri Mar 10, 2023, 04:13 PM - Edit history (1)

Source: Yahoo Finance

Troubled lender Silicon Valley Bank has been closed by the FDIC after deposit outflows and a failed capital raise sent the firm into crisis this week.

In a statement released late Friday morning, the FDIC said: "Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. 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."

Shares of the bank's parent company, SVB Financial (SIVB), remained halted for trade on Friday after having lost 60% on Thursday and another 60% in pre-market trading on Friday.

The FDIC's statement continued: "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."

Read more: https://finance.yahoo.com/news/fdic-closes-silicon-valley-bank-after-bank-fails-to-raise-new-capital-165322938.html

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No more at link but it says it is a breaking story that is being updated.

I'm aware of the previous LBN story,

Silicon Valley Bank Financial in talks to sell itself after attempts to raise capital have failed, sources say
https://www.democraticunderground.com/10143044364

but I think that regulators seizing it is more than just a small update to this earlier story. It's the largest bank to fail since the 2008 crisis, according to other news sources. Edit I changed "FDIC seizing it" to "regulators seizing it" after reading USONIAN #5 below and more carefully reading the excerpt above.

Don't confuse Silicon Valley Bank with the crypto-immersed Silvergate Bank / Silvergate Capital. Silicon Valley Bank is a real bank. (Don't ask me what Silvergate Bank is, I don't follow the crypto garbage).

The failure of these 2 banks is a reason that expectations of a half percent Fed rate hike on March 22 -- which was running 2:1 vs. a quarter percent rate hike -- has now been reduced to a 50:50 bet per the CME Fedwatch Tool link https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html -- update, it's now (1252pm ET) a 55:45 bet in favor of the quarter point rate hike. -- Update #2 at 313 PM ET, it's now 60:40 in favor of the quarter point rate hike.

[elias7]

1. Wasn't SVB linked to the Trump server (along with Russia's Alfa) bank during 2016 campaign?

FISA court warrant that went nowhere.

[Renew Deal]

2. From what I've read it appears that inflation drove down the value of their bonds and then...

a bank run started by large customers.

[mahatmakanejeeves]

3. As a former WaMu shareholder, I feel the pain of the SVB Financial shareholders.

There's still some remnant of WaMu out there, but it's worth only a few pennies on what used to be worth several dollars.

[OnlinePoker]

4. It's not up on the FDIC Failed Bank List yet

When it is, it will be the first failed bank in the U.S. since October 2020.

https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/

[usonian]

5. From CA Department of Financial Protection and Innovation

California Financial Regulator Takes Possession of Silicon Valley Bank
https://dfpi.ca.gov/2023/03/10/california-financial-regulator-takes-possession-of-silicon-valley-bank/
Mar 10, 2023

Download this press release (PDF).

(it's the same as the web page, in PDF format)

SAN FRANCISCO – The California Department of Financial Protection and Innovation (DFPI) announced today that, pursuant to California Financial Code section 592, it has taken possession of Silicon Valley Bank, citing inadequate liquidity and insolvency. The DFPI appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of Silicon Valley Bank.

Silicon Valley Bank is a state-chartered commercial bank based in Santa Clara and is a member of the Federal Reserve System, with total assets of approximately $209 billion and total deposits of approximately $175.4 billion as of Dec. 31, 2022. Its deposits are federally insured by the FDIC subject to applicable limits.

For information about FDIC coverage limits and requirements, visit www.fdic.gov or call toll-free 1-877-ASK-FDIC.

[Warpy]

6. Crypto is killing actual banks?

Not good, people, double plus not good.

Stupid Feds needed to do something about crypto 5 years ago but TFG was in office so they didn't even try. I just hope it's not too late to stop the contagion.

[leftieNanner]

7. And apparently the CEO sold $3.5 million stock in the past two weeks

Makes a person go hmmmmmmmmmmm.

[Renew Deal]

8. This article explains some of it

I rarely comment on public events, but the reactions of the venture community to SVB’s financial issues is quite the special case. I’m troubled by the lack of understanding of the banking system by sophisticated investors; hence a quick primer.

SVB is going through a liquidity crisis. They clearly underestimated the velocity of their deposit base, thereby mismanaged their asset-liability mix. This was compounded by a period of unprecedented increases in interest rates by the Fed, causing SVB’s securities book to be worth less on paper than they paid for it.

Fixed income securities (bonds) go down in value if interest rates rise after issuance. For example, if I bought a 2-year treasury bond for a 1.75% annual interest rate a year ago, today’s market yield of 4.78% means investors would offer a significant discount to par for my bond. Yet, at maturity, I would still get the full value of my bond plus interest back from the US Treasury. These are called “money good” securities. There is no impairment or credit issue with the securities, but the value has decreased due to changes in market prices.

A liquidity crisis is quite different from what we saw in ’08, where bank securities were NOT money good, and the market would only pay pennies on the dollar for credit-impaired bond.


https://www.linkedin.com/pulse/few-thoughts-svb-jeremy-solomon

[progree]

9. Thanks 😊 /nt

[RussBLib]

11. Whoever the Treasurer was for SVB

...fucked up pretty royally. I just hope we don't get a cascade of bankruptcies and mass layoffs because of this.

But my antenna is up on the topic of fraud. It's likely somebody made off with a ton of money.

[LudwigPastorius]

10. I thought Dodd-Frank was supposed to fix this...

by separating commercial banks from investment banks.

And, what is loaning money to venture capitalists to fund startups, but a high risk investment?

Also, Dodd-Frank supposedly required commercial banks to keep more of their depositors' cash on hand. If a bank can be wiped out by a couple of upticks of the interest rate, it hasn't got enough money.

[twodogsbarking]

12. Remember back when hundreds of banks violated securities laws?

There were too many to prosecute so they let them all go. Stay tuned.