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What to watch: The FDIC, which has transferred all of SVB's deposits to a new bank, has said that "all insured depositors will have full access to their insured deposits no later than Monday morning."
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"The real victims of the SVB fallout are the depositors: startups (10 to 100 employees) who cannot make payroll, and will have to shut down or furlough next week," he tweeted prior to the FDIC's announcement that it would guarantee the full amount of all deposits. "If these startups wait weeks/months for their deposits, we have destroyed a generation of US startups, at random."
On the morning of Friday, March 10, 2023, the California Department of Financial Protection and Innovation seized SVB and placed it under the receivership of the Federal Deposit Insurance Corporation (FDIC). An additional $100 billion were expected to be withdrawn during Friday.[5] About 89 percent of the bank's $172 billion in deposit liabilities exceeded the maximum insured by the FDIC.[6][7] Two days after the failure, the FDIC received exceptional authority from the Treasury and announced jointly with other agencies that all depositors would have full access to their funds the next morning.[8][9] Seeking to auction off all or parts of the bank, the FDIC reopened it on Monday March 13 as a newly organized bridge bank, Silicon Valley Bridge Bank, N.A.[10][7][11] Although some characterized the government response as a bailout, the plan did not entail rescuing the bank, its management or shareholders, but rather making uninsured depositors whole from the proceeds of selling the bank's assets, without the use of taxpayer money.[12]
A 2021 Federal Reserve review of the bank found several deficiencies in its risk management procedures. The bank failed to fix six citations issued by the Fed and was placed under a full supervisory review in July 2022. In the autumn, San Francisco Fed officials met with SVB senior leaders to discuss the bank's ability to raise cash in a crisis and possible exposure to losses as interest rates rose. Fed officials determined the bank was using flawed models that led SVB officers to incorrectly believe rising interest rates would increase the bank's interest revenue to substantially stabilize its financial condition. By early 2023, the Fed placed SVB in a "horizontal review" of its risk management procedures.[40]
The simultaneous failures of SVB and New York's Signature Bank raised concern about the condition of other regional banks, with particular attention to First Republic Bank and Western Alliance.[67] Faced with the possibility of a broader loss of confidence, on March 12 the Treasury granted the FDIC an exception allowing it to guarantee the uninsured deposits of both failed banks and to cover the expense through special assessments on other member banks.[8][9][68] On March 13 the FDIC transferred SVB assets to a new bridge bank, Silicon Valley Bridge Bank, N.A., and appointed Tim Mayopoulos as CEO.[10][69] The bridge bank consolidated insured and uninsured deposits into a single institution, making it more attractive to prospective buyers.[70] There is a dispute about whether the U.S. government's guarantee to insure depositors in full, rather than just the $250,000 per account protected by law, qualifies as a bailout. President Joe Biden denied the term bailout applies in this particular case.[71] Treasury Secretary Janet Yellen had already ruled out bailing out SVB.[72]
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