Customers line up around the block in front of Silicon Valley Bank after collapse sparks fears of losing $250,000
Dozens of customers were seen lining up to withdraw cash they had with Silicon Valley Bank on Friday after its sudden collapse.
In images posted to Twitter, customers could be seen lining up from the entrance of a Bay Area branch in Menlo Park, California, all the way around the block, in the pouring rain.
There were similar scenes at other branches of the bank, including in Manhattan, where panic reached such a point that building managers at the SVB office called the police after a group of disgruntled tech founders showed up at the door in an attempt to to withdraw your funds.
Founded in 1982, SVB was the largest bank in Silicon Valley and specialized in lending to start-up technology companies, providing funding for tens of thousands of start-ups.
But the company’s shares plunged more than 80 percent after it shocked the market late Wednesday by warning it had suffered a $1.8 billion loss following a forced sale of its portfolio of assets, which consisted mostly of for US government debt.
Customers could be seen lining up to withdraw their funds from Silicon Valley Bank after the bank’s sudden collapse. Pictured are customers outside the Menlo Park branch
Dozens of customers could be seen lining up in front of their Menlo Park, California, branch.
A bank worker is seen telling customers that Silicon Valley Bank (SVB) headquarters is closed Friday in Santa Clara, California
The lender’s woes sparked a spate of customer withdrawals and forced California regulators to step in after a record drop in its share price raised concerns about its stability.
SVB’s failure is the biggest since the collapse of Washington Mutual, which imploded during the 2008 financial crisis and was at the time the largest savings and loan association in the US.
Trading in the shares was halted on Friday as the crisis intensified. The company was reported to have been in talks to sell, but any chance of a deal quickly faded as its customers scrambled to get their cash.
The slide in SVB shares spread to major US banks, with JP Morgan shares down 7 percent this week, Citigroup down 7.1 percent, Morgan Stanley down 7.2 percent, Goldman Sachs it plunged 7 percent and Bank of America fell 11 percent. .
SVB shares fell 67 percent from $267 to $106 on Thursday before trading was halted.
NYPD was called after ‘about a dozen’ financiers, including former Lyft executive Dor Levi, showed up outside a Park Avenue branch of SVB when a bank run forced the Federal Corporation Deposit Insurance to confiscate their assets on Friday morning.
At the Park Avenue branch, the doors were locked and only employees could enter the building with a key card.
Two police cars arrived at the Park Avenue bank branch in Manhattan on Friday after investors frantically arrived trying to get their money out.
People line up outside the closed Silicon Valley Bank in Santa Clara on Friday
A sign is shown at the entrance to Silicon Valley Bank. The Federal Deposit Insurance Corporation seized the bank’s assets on Friday, marking the biggest bank failure since Washington Mutual during the height of the 2008 financial crisis.
European banks were also affected, with shares of Deutsche Bank falling 7.4 percent, and France’s Societe Generale and BNP Paribas falling 4.5 percent and 3.8 percent, respectively.
SVB, the nation’s 16th-largest bank, has been a crucial lender to tech start-ups, healthcare companies and venture capital-backed companies, including some of the industry’s best-known brands.
“This is an extinction-level event for startups,” said Garry Tan, chief executive of Y Combinator, a startup incubator that launched Airbnb, DoorDash and Dropbox and has referred hundreds of entrepreneurs to the bank.
‘I’ve literally been listening to hundreds of our founders asking for help on how they can get through this. They’re asking, ‘Do I have to furlough my workers?’
Nearly half of the US healthcare and technology companies that went public last year after getting early funding from venture capital firms were Silicon Valley Bank clients, according to the bank’s website.
The bank also boasted of its connections to leading tech companies like Shopify, ZipRecruiter and a top venture capital firm, Andreesson Horowitz.
Tan estimated that nearly a third of Y Combinator startups won’t be able to make payroll sometime in the next month if they can’t access their money.
Internet television provider Roku was one of the victims of the bank’s collapse. It said in a regulatory filing on Friday that about 26% of its cash, $487 million, was on deposit with Silicon Valley Bank.
Roku said its deposits with SVB were largely uninsured and it did not know “to what extent” it could recover them.
As part of the seizure, California banking regulators and the FDIC transferred the bank’s assets to a newly created institution: the Deposit Insurance Bank of Santa Clara. The new bank will begin paying insured deposits on Monday.
Then the FDIC and California regulators plan to sell off the rest of the assets for other depositors to recoup.
Failure came with incredible speed. Some industry analysts suggested on Friday that the bank was still a good company and a wise investment. Meanwhile, Silicon Valley Bank executives were trying to raise capital and find additional investors. However, the bank’s share trading was halted before the stock market’s opening bell due to extreme volatility.
Shortly before noon, the FDIC moved to close the bank. Notably, the agency did not wait until close of business, which is the typical approach. The FDIC could not immediately find a buyer for the bank’s assets, indicating how quickly depositors withdrew.
Founded in 1982 and headquartered in the Californian city of Santa Clara, the financier was one of the largest and oldest banks in Silicon Valley that managed most of the area’s local depositories. Its collapse marks a swift fall from grace for a lender that was valued at more than $44 billion a year ago.
At the time of its failure, the bank had about $209 billion in total assets, the FDIC said. It was not clear how many of his deposits were over the $250,000 insurance limit, but previous regulatory reports showed many accounts exceeded that amount.
It mainly focused on lending cash to technology companies and offering services to private equity and venture capital groups to invest in the sector.
Chief Greg Becker found himself struggling to bolster confidence in the bank, as the rapidly escalating crisis caused many of his backers to withdraw their money, leaving him facing a cash crunch.
In a hastily arranged call on Thursday, Becker, 52, advised SVB’s embattled patrons and founders to “stay calm,” saying “the last thing we need is for them to panic.”