NEW YORK (AP) — The Federal Deposit Insurance Corporation on Friday seized the assets of Silicon Valley Bank, the largest bank failure since Washington Mutual during the height of the 2008 financial crisis.
The FDIC ordered the closure of Silicon Valley Bank and immediately took a position on all deposits with the bank. The bank had $209 billion in assets and $175.4 billion in deposits at the point of failure, the FDIC said in a statement. It was unclear how many of the deposits were above the $250,000 insurance limit at this point.
Silicon Valley was highly exposed to the technology industry and there is little chance of contagion in the banking sector as a whole as major banks hold enough capital to avoid a similar situation.
Silicon Valley Bank’s financial health came under increasing scrutiny this week after the bank announced plans to raise up to $1.75 billion to strengthen its capital position amid concerns about higher interest rates and the economy.
THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.
NEW YORK (AP) — Bank shares tumbled Friday as investors grew increasingly concerned that the assets of a bank heavily exposed to the technology sector could need emergency capital or be sold in the coming days.
Shares of SVB Financial Group, the parent company of Silicon Valley Bank, plunged nearly 70% before halting trading for the opening bell on the Nasdaq. The bank had announced plans to raise up to $1.75 billion to strengthen its capital position amid concerns about higher interest rates and the economy.
CNBC reported that attempts to raise capital have failed and the bank now wants to sell itself. There are media reports of depositors quickly withdrawing money from the bank, possibly causing a bank run.
The Silicon Valley bank is not a small bank, it is the 16th largest bank in the country, with $210 billion in assets. It acts as a major financial conduit for venture-backed companies, which have been hit hard over the past 18 months as the Federal Reserve raised interest rates and made riskier tech assets less attractive to investors.
Venture-backed companies were reportedly advised to take at least two months’ worth of “burn” cash from Silicon Valley Bank to cover their expenses. Typically VC-backed companies aren’t profitable, and how quickly they use the money they need to run their business — their so-called “burn rate” — is a typically important metric for investors.
Diversified banks such as Bank of America and JPMorgan pulled out of an early slump thanks to data released by the Labor Department on Friday, but regional banks, especially those with heavy exposure to the technology industry, rallied.
Still, it’s been a bloody week. Shares of major banks are down between 7% and 12% this week.
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