Collapse
In 2022, SVB began to incur steep losses following increased interest rates and a major downturn in growth in the tech industry, with the bank heavily concentrated in long-term Treasury bonds.[69][70] As of December 31, 2022, SVB had mark-to-market accounting unrealized losses in excess of $15 billion for securities held to maturity.[69] In early March of 2023, a combination of factors – including poor risk management and a bank run driven by tech industry investors – caused the bank to collapse.[71][72] Use of social media was reported to be a factor in both the initial bank run and its aftermath, with those affected by the potential loss of deposits calling for regulators to ensure that uninsured accounts were made whole.[73][74][75][76]
Early in the morning of March 10, examiners from the Federal Reserve and the FDIC arrived at the offices of SVB to assess the company's finances.[77] Several hours later, the California Department of Financial Protection and Innovation (DFPI) seized SVB[78] citing inadequate liquidity and insolvency,[79] and appointed the FDIC as receiver.[80][81] The FDIC then established a deposit insurance national bank, the Deposit Insurance National Bank of Santa Clara, to re-open the bank's branches the following Monday and enable access to insured deposits.[17][82][83]
On March 13, 2023, the FDIC announced via press release,[89] that the FDIC transferred SVB assets to a new bridge bank, Silicon Valley Bridge Bank, N.A., and appointed Tim Mayopoulos as CEO.[90][91] The new entity, Silicon Valley Bridge Bank, N.A., was FDIC-operated, and all SVB clients became customers of the new bridge bank.[92] The FDIC stated the goal was to provide a new level of protection to SVB clients, including keeping regular banking hours and expected banking activities, like online banking, ATM access to client funds, and check writing. The FDIC added that SVB’s official checks would clear and that loan customers should continue making payments, and clarified that their role was not to protect Silicon Valley Bank shareholders and certain unsecured debt holders.[93]
Regulatory filings from December 2022 estimated that more than 85% of deposits were uninsured.[94] The failure of SVB was the largest of any bank since the 2008 financial crisis by assets, and the second-largest in U.S. history behind that of Washington Mutual.[95] SVB's Chinese joint venture, whose chairman is the chairman of Shanghai Pudong Development Bank, said their operations were "sound" as of March 11, 2023.[43] The UK government announced that it was working on a lifeline for British tech firms affected by the collapse of the Bank and its branch in the United Kingdom as a part of the fallout from the parent bank.[96] 3,000 firms in the UK were believed to be at risk of bankruptcy without a rescue.[97] On March 13, 2023, after a bidding process, it was announced that HSBC UK had agreed to acquire Silicon Valley Bank UK for £1 in a rescue deal, at no cost to the taxpayer and with depositors fully protected.[98]
On March 17, 2023, Silicon Valley Bank's former parent company, SVB Financial Group, filed for Chapter 11 bankruptcy. The bankruptcy did not include its remaining subsidiaries, SVB Capital and SVB Securities. Silicon Valley Bridge Bank or SVB Private is also not part of the bankruptcy filing as they are no longer affiliated with SVB Financial Group.[101][102] The fallout has created what institutional investors and startups have referred to as a large gap in the ecosystem of which the full impact on startups and tech companies is yet to be determined.[103]
A subsequent analysis from the Federal Reserve conducted by then-Vice Chair for Supervision Michael Barr revealed described poor oversight and said the bank's collapse highlighted "weaknesses in regulation and supervision that must be addressed," noting how there was potential for damaging contagion. It also outlined possible changes to the banking system's regulatory framework. The New York Times described it as "a rare instance of overt self-criticism from the Fed, and it comes as the aftershocks of Silicon Valley Bank’s collapse continue to shake the American financial system."[104]
On March 26, 2023, the FDIC announced that First Citizens BancShares would acquire the commercial banking business of SVB.[2][3][105] As part of the deal, First Citizens purchased around $119 billion in deposits and $72 billion of SVB's loans discounted by $16.5 billion, while around $90 billion of SVB's securities remain in receivership.[106] SVB's 17 branches reopened as "Silicon Valley Bank, a division of First Citizens Bank" the next day, with all SVB depositors becoming depositors of First Citizens.[3][22] First Citizens was the 30th-largest bank in the United States, in terms of assets, at the end of 2022. After the acquisition, it is set to enter the top 20.[107]
