The USA records its second-biggest bank casualty in its history in the Silicon Valley Bank collapse. The collapse of the bank which has been described as a “California-based tech lender” has not only fueled market chaos,but has got many speculating a wider contagion in the USA banking sector.
Though a little known bank, Silicon bank has been a 40 year old bank which is a lender to to startups and venture capitalists.
Its collapse marks the second-biggest bank casualty in US history. The bank was taken over by the regulator over liquidity concerns.
The California Department of Financial Protection and Innovation(FDIC) on Friday “placed its remaining assets under the Federal Deposit Insurance Corp.’s control”.
What does this mean to the many customers of the bank?
The FDIC had this to say on the bank’s collapse. They said insured depositors will “have full access to their insured deposits no later than Monday morning.” They further added that SVB’s official checks will “continue to clear” despite the closure.
It has been speculated that Uninsured deposits totals to a whopping $151 billion as of Dec. 31.
This figure is according to public filings.
This is what the FDIC had to say about uninsured depositors. They said “Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.”
“Lot of people I know lost their $,” one frantic tech entrepreneur told The Post in a Friday text message. “Friend’s startup had $20M in bank, couldn’t get it out.”
CEO of Silicon Valley called for calm just a day to bank’s collapse
There were concerns over the health of the bank. However the CEO of the bank, Greg Becker urged all investors to be calm and that they should not panic.
He told them during a conference call on Thursday. This calls went unheeded as their clients were scrambling to take huge balances even in excess of the FDIC insured cap of $250,000.
It has been reported that huge personalities like Billionaire Peter Thiel’s Founders Fund and other tech luminaries even urged startups to pull their cash. They said the better do that or risk losing it entirely. This came well ahead of the bank’s failure. The failure of the bank was occasioned by the major slowdown in the initial public offering market this year.
There were others who were even calling on the government to bail the bank out.
Such individuals include the eccentric investor Michael Burry of “The Big Short” fame.
He had tweeted, ‘”It is possible today we found our Enron.”
Hedge fund billionaire Bill Ackman also called for a government bailout of the bank.