Silicon Valley Bank Shuttered by California Regulator over Liquidity and Insolvency Concerns

In a shocking development, Silicon Valley Bank (SVB), one of the largest banks in the United States, was shuttered by the California Department of Financial Protection and Innovation on Friday, citing inadequate liquidity and insolvency.

The bank, based in Santa Clara and a member of the Federal Reserve System, had total assets of approximately $209 billion and total deposits of approximately $175.4 billion as of Dec. 31, 2022. Its deposits were federally insured by the FDIC, subject to applicable limits.

The DFPI has appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver of Silicon Valley Bank, and according to the FDIC press release Friday, “All insured depositors will have full access to their insured deposits no later than Monday morning.”

The closure of Silicon Valley Bank follows closely on the heels of competitor Silvergate’s voluntary liquidation earlier this week. Holding company Silvergate Corp. (SI) said in its announcement earlier this week that all deposits would be repaid.

While not perceived as “crypto-friendly” as Silvergate, the tech-forward Silicon Valley Bank did count a number of crypto entities as clients – especially hedge funds and VC firms. According to CoinDesk research, Blockchain Capital, Castle Island Ventures, Dragonfly, and Pantera all had relationships with the bank.

The bank’s closure has sent shockwaves through the financial industry, with fellow West Coast lenders First Republic Bank (FRC) down 15%, and Western Alliance Bancorp (WAL) down 25%. Crypto-friendly Signature Bank (SBNY) has also added to losses, with the stock now down 13%.

The broader stock market has turned from modest gains to modest losses, with the S&P 500 now lower by 0.3%. Bitcoin is little changed at just above $20,000.

A Silicon Valley Bank client in the U.K. told Reuters the bank’s dashboard, which should show “account balances and money transfers,” was down.

SVB’s collapse with $211 billion in assets is among the largest in history, second only to Washington Mutual Bank’s failure during the Great Financial Crisis in 2008.

The Department of Financial Protection and Innovation protects consumers, regulates financial services, and fosters responsible innovation. DFPI protects consumers by establishing and enforcing financial regulations that promote transparency and accountability. They empower all Californians to access a fair and equitable financial marketplace through education and preventing potential risks, fraud, and abuse.

The news of Silicon Valley Bank’s closure is sure to reverberate throughout the financial industry, and many will be watching closely to see what the future holds for this once-prominent banking institution.

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