What happens next at Silicon Valley Bank?
To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB).
When the bank closed on Friday, the FDIC immediately transferred all of Silicon Valley Bank’s insured deposits to DINB.
Starting Monday, Silicon Valley Bank’s main office and all branches will reopen under DINB control.
Banking activities will resume no later than Monday, March 13, including online banking and other services. Official Silicon Valley Bank checks will continue to cash,” the FDIC said in a statement.
Customers with accounts exceeding the insured amount of $250,000 should contact the FDIC toll free at 1-866-799-0959.
Treasury Secretary Janet Yellen announced Sunday that the government will not bail out the bank.
President Joe Biden is said to be discussing the issue with California Governor Gavin Newsom.
Newsom (pictured in October) said in a statement that “Everyone is working with (the) FDIC to stabilize the situation as quickly as possible to protect jobs, people’s livelihoods and the entire innovation ecosystem.”
Will new SVB customers get their money back?
Following the close, the FDIC said SVB depositors will have full access to their insured deposits no later than Monday morning.
The federal agency insures each depositor up to at least $250,000.
For customers who have deposits of more than $250,000, which likely includes many of the bank’s start-up customers, what happens next is less clear, but following the Federal Reserve’s Sunday night announcement that the fewer can rest easy knowing that they will finally get their money. refund of money
The FDIC said that at the time of closing, the amount of uninsured deposits at the bank was not determined.
At the time of the bankruptcy, SVB had $209 billion in total assets and owed depositors about $175.4 billion, according to the FDIC.
However, some of those assets could be difficult to liquidate, such as ownership stakes in unlisted companies or loans for early-stage startups.
The Silicon Valley Bank New York office is empty in New York on Friday. But after the shutdown, the Federal Reserve said that SVB depositors will have full access to their deposits.
The S&B 500 banking sector index on Friday (above), falling less than 1% after losing 6.6% on Thursday in its biggest one-day loss in more than two years.
Will tech startups be able to make the payroll?
SVB is a prime bank for start-ups and many with their cash tied up could struggle to pay payroll. Some have already indicated that they risk having to lay off staff, but it is not unlikely that they will have to.
In Seattle, Shelf Engine CEO Stefan Kalb found himself in emergency meetings devoted to figuring out how to meet payroll instead of focusing on his startup’s business of helping grocers manage their food orders. .
It has been a brutal day. We literally have every penny in Silicon Valley Bank,” Kalb said Friday, pegging the deposit amount which is now pegged at millions of dollars.
He’s filing a claim for the $250,000 limit, but that wouldn’t have been enough to keep paying Shelf Engine’s 40 employees for long.
Tara Fung, co-founder and CEO of tech startup Co:Create that helps launch digital loyalty and rewards programs, said her company uses multiple banks in addition to Silicon Valley Bank, so she was able to shift her payroll and vendor payments to another bank on Friday.
Fung said his company chose the bank as a partner because it is the “gold standard for tech companies and banking associations,” and he was upset that some people seemed to gloat over his failure and unfairly link him to doubts about cryptocurrency companies.
Other companies have high percentages of their cash in Silicon Valley Bank and need to access more than the FDIC-protected amount.
“If the government allows people to take at least half of the money they have in Silicon Valley Bank next week, I think everything will be fine,” Varsavsky said Saturday.
“But if they stick to $250,000, it’s going to be an absolute disaster where so many companies won’t be able to make payroll.”
Andrew Alexander, a calculus teacher at a private high school in San Francisco that uses Silicon Valley Bank, wasn’t overly concerned. His next paycheck isn’t due for another two weeks, and he’s confident that many of the problems can be resolved by then.
But he worries about friends whose livelihoods are most deeply entwined with the tech industry and Silicon Valley.
“I have a lot of friends in the startup world who are terrified,” Alexander said, “and I really feel sorry for them.” It is quite scary for them.
People walk through the parking lot at the Silicon Valley Bank headquarters in Santa Clara on Friday after financial regulators closed the bank.
Charts released by SVB show sharp declines in overall VC investments (top) and the outflow of SVB client funds (bottom) over the past year as interest rates have risen.
What if there is no buyer for SVB?
If there is no buyer for SVB, then the FDIC will sell the bank’s assets to raise money to pay off uninsured depositors, CNBC reported.
Some assets that are highly liquid and could be sold quickly with little loss are the tens of billions of dollars in agency mortgage-backed securities.
Loans are other assets, but they are less liquid and can be harder to sell, which could take several weeks. You could also end up with uninsured deposits that are less than 100 percent refunded.