NEW YORK (AP) — The Federal Deposit Insurance Corporation seized the assets of Silicon Valley Bank on Friday, marking 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 position of all deposits at the bank. The bank had $209 billion in assets and $175.4 billion in deposits as the time of failure, the FDIC said in a statement. It was unclear how much of deposits was above the $250,000 insurance limit at the moment.
Silicon Valley was heavily exposed to tech industry and there is little chance of contagion in the banking sector as a whole, with major banks holding sufficient capital to avoid a similar situation.
The financial health of Silicon Valley Bank was increasingly in question this week after the bank announced plans to raise up to $1.75 billion in order to strengthen its capital position amid concerns about higher interest rates and the economy.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — Bank stocks were pummeled Friday as investors grew increasingly fearful that the assets of a bank heavily exposed to the technology sector might need find emergency capital or be sold in the coming days.
Shares of SVB Financial Group, the parent company of Silicon Valley Bank, plummeted nearly 70% before trading was halted before the opening bell on the Nasdaq. The bank had announced plans to raise up to $1.75 billion in order 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 is now looking to sell itself. There are media reports that depositors are rapidly pulling funds out of the bank, potentially setting up a bank run.
KRON On is streaming live news now
Silicon Valley bank is not a small bank, it’s the 16th largest bank in the country, holding $210 billion in assets. It acts as a major financial conduit for venture capital-backed companies, which have been hit hard in the past 18 months as the Federal Reserve has raised interest rates and made riskier tech assets less attractive to investors.
Venture capital-backed companies were being reportedly advised to pull at least two months’ worth of “burn” cash out of Silicon Valley Bank to cover their expenses. Typically VC-backed companies are not profitable and how quickly they use the cash they need to run their businesses — their so-called “burn rate” — is a typically important metric for investors.
Diversified banks like Bank of America and JPMorgan pulled out of an early slump due to data released Friday by the Labor Department, but regional banks, particularly those with heavy exposure to the tech industry, were in decline.
Yet it has been a bruising week. Shares of major banks are down this week between 7% and 12%.