Silicon Valley Bank headquarters in Santa Clara, California, on March 13, 2023
This article is part of a series about the
2023 United States banking crisis
Press camera outside a Signature Bank branch in New York on March 13, 2023
Background
Economic Growth, Regulatory Relief and Consumer Protection Act
2021–2023 inflation surge
2020–2022 cryptocurrency bubble
Bankruptcy of FTX
Events
Winding down of Silvergate Bank
Collapse of Silicon Valley Bank
Collapse of Signature Bank
Collapse of First Republic Bank
Related groups
Federal Reserve Board of Governors
Federal Deposit Insurance Corporation
United States Department of the Treasury
Effects
Bank Term Funding Program
Acquisition of Credit Suisse by UBS
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On March 10, 2023, Silicon Valley Bank (SVB) failed after a bank run, marking the third-largest bank failure in United States history and the largest since the 2007–2008 financial crisis.[1][2] It was one of three bank failures, along with Silvergate Bank and Signature Bank, in March 2023 in the United States.
Seeking higher investment returns from its burgeoning deposits, SVB had dramatically increased its holdings of long-term securities since 2021, accounting for them on a hold-to-maturity basis. The market value of these bonds decreased significantly through 2022 and into 2023 as the Federal Reserve raised interest rates to curb an inflation surge, causing unrealized losses on the portfolio.[3][4] Higher interest rates also raised borrowing costs throughout the economy and some Silicon Valley Bank clients started pulling money out to meet their liquidity needs. To raise cash to pay withdrawals by its depositors, SVB announced on Wednesday, March 8 that it had sold over US$21 billion worth of securities, borrowed $15billion, and would hold an emergency sale of some of its treasury stock to raise $2.25billion. The announcement, coupled with warnings from prominent Silicon Valley investors, caused a bank run as customers withdrew funds totaling $42billion by the following day.
On the morning of March 10, 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 An additional $100 billion were expected to be withdrawn during Friday.[5] About 89 percent of the bank's $172billion in deposit liabilities exceeded the maximum insured by the FDIC.[6][7] Two days after the failure,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]
The collapse of SVB had significant consequences for startup companies in the U.S. and abroad,[13] with many briefly unable to withdraw money from the bank.[14] Other large technology companies, media companies, and wineries were also affected. For a number of founders and their venture capital backers, this was the bank of choice.[15]
^Copeland, Rob; Flitter, Emily; Farrell, Maureen (March 10, 2023). "Silicon Valley Bank Fails After Run by Venture Capital Customers". The New York Times. Archived from the original on March 10, 2023. Retrieved March 10, 2023.
^Warren, Elizabeth (March 13, 2023). "Elizabeth Warren: We Can Prevent More Bank Failures". The New York Times. Archived from the original on March 13, 2023. Retrieved March 13, 2023.
^"Why did Silicon Valley Bank fail?". The Guardian. Reuters. March 10, 2023. ISSN 0261-3077. Archived from the original on March 13, 2023. Retrieved March 13, 2023.
^Pandolfo, Chris (March 14, 2023). "Silicon Valley Bank committed 'one of the most elementary errors in banking,' Larry Summers says". Yahoo! Finance. Archived from the original on March 14, 2023. Retrieved March 15, 2023.
^Ackerman, Anderew; Harrison, David; Duehren, Andrew (March 28, 2023). "Lawmakers Scold Fed Over Silicon Valley Bank Collapse". Wall Street Journal. Retrieved March 28, 2023.
^French, David; Wang, Echo; John, Alun (March 10, 2023). "Silicon Valley Bank is largest failure since financial crisis, billions stranded". Reuters. Archived from the original on March 11, 2023. Retrieved March 10, 2023.
^ ab"FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank, Santa Clara, California" (Press release). Washington: Federal Deposit Insurance Corporation. March 10, 2023. Archived from the original on March 10, 2023.
^Cite error: The named reference Allyn was invoked but never defined (see the help page).
^Cite error: The named reference treasury pr 12mar was invoked but never defined (see the help page).
^"FDIC Acts to Protect All Depositors of the former Silicon Valley Bank, Santa Clara, California" (Press release). Washington, D.C.: Federal Deposit Insurance Corporation. March 13, 2023. Archived from the original on March 13, 2023. Retrieved March 13, 2023.
^Farrell, Maureen (March 14, 2023). "Inside the Collapse of Silicon Valley Bank". The New York Times. Archived from the original on March 15, 2023. Retrieved March 15, 2023.
^Allyn, Bobby (March 14, 2023). "The White House is avoiding one word when it comes to Silicon Valley Bank: bailout". NPR. Archived from the original on March 15, 2023. Retrieved March 16, 2023.
^Cheng, Evelyn; Cherry, Daisy (March 13, 2023). "Silicon Valley Bank collapse hits startups as far away as China". CNBC. Archived from the original on March 13, 2023. Retrieved March 13, 2023.
^"Some SVB Clients Are Finally Regaining Account Access". Bloomberg.com. March 13, 2023. Archived from the original on March 13, 2023. Retrieved March 15, 2023.
^Griffith, Erin; Isaac, Mike; Frenkel, Sheera (March 17, 2023). "Mortgages, Wine and Renovations: Silicon Valley Bank's Deep Tech Ties". The New York Times. ISSN 0362-4331. Retrieved March 17, 2023.
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