The Federal Deposit Insurance Corp. has transferred the bank’s deposits to a new entity in order to protect consumers.
Silicon Valley Bank collapsed on Friday after a run on deposits drove the Northern California institution into insolvency, marking the largest bank failure since the financial crisis.
SVB’s stunning downfall, which threatens to upend the U.S. venture capital industry, is sparking fears that other small and regional banks could face similar pressure amid soaring interest rates and shrinking deposits.
“We are looking at this closure of SVB as a sign of extremely concerning industry conditions,” said Michele Alt, a former official at the Office of the Comptroller of the Currency, a national bank regulator, and a partner at the advisory firm Klaros Group. “It’s reminiscent of past crises. And what we’re really focused on are banks with unrealized losses.”
Treasury Secretary Janet Yellen and other policymakers are on alert that problems at the institution — which had $209 billion in assets and counted more than half of Silicon Valley-backed startups and health-care businesses among its depositors — could spread.
Yellen told Congress that she was keeping a close eye on the bank’s financial crunch shortly before the California Department of Financial Protection and Innovation announced it had taken possession of the institution Friday morning. The FDIC seized control of the bank’s assets, an unusual move suggesting that immediate action was necessary.
“There are recent developments that concern a few banks that I’m monitoring very carefully,” Yellen told lawmakers during a committee hearing. “When banks experience financial losses, it is and should be a matter of concern.”
After the bank’s collapse, she convened the three federal banking regulators to discuss the fallout.
“Secretary Yellen expressed full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient and regulators have effective tools to address this type of event,” Treasury said in a press release.
The collapse sent the overall stock market tumbling. Shares of other regional banks, including First Republic Bank, PacWest Bancorp, Western Alliance Bancorp and Signature Bank, were frozen late Thursday with growing concerns of broader risks to the sector.
Rep. Ro Khanna (D-Calif.), whose Silicon Valley district includes both the bank and many of the venture capital and startup clients, urged