Regulators have seized the assets of one of Silicon Valley’s top banks, marking the largest failure of a U.S. financial institution since the height of the financial crisis almost 15 years ago. Silicon Valley Bank, the nation’s 16th-largest bank, failed after depositors hurried to withdraw money this week amid anxiety over the bank’s health. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008.The bank served technology workers and venture capital-backed companies, including some of the industry’s best-known brands.Adrian Mendoza and his wife run Mendoza Ventures, a venture capital firm in Boston.He says the collapse of California-based Silicon Valley Bank will hit tech communities hard. “We have the second largest tech ecosystem, following San Francisco,” Mendoza said. “Without capital, without cash, you can’t fund payroll. So, we’re definitely going to see massive job loss.”SVB’s collapse happened quickly.”By night, people were pulling dollars out and by 2 p.m., the FDIC walked in and regulators shut the bank down,” Mendoza said. The nation’s 16th largest bank was hit hard by the downturn in tech stock over the last year, as well as the federal reserve’s plan for aggressive interest rate hikes to combat inflation. As people started pulling out their money, the bank didn’t have the cash to cover.”The dollars were being pulled faster than the bank actually had,” Mendoza said. Nearly half of the U.S. technology and health care companies that went public last year after getting early funding from venture capital firms were Silicon Valley Bank customers, according to the bank’s website.SVB’s situation in Massachusetts is unique, where it has eight Boston branches, six formerly Boston Private Bank.”It had individual customers,” Massachusetts Secretary of State William Galvin said. “I think there is a genuine concern for our Massachusetts citizens.”Galvin says that means individuals, not just businesses, have money tied up SVB’s mess.WCVB saw long lines of people trying to get into Boston-area branches on Friday.”It’s not a time for panic, but it’s a time for cautious concern, Galvin said.The White House said Treasury Secretary Janet Yellen was “watching closely.” The administration sought to reassure the public that the banking system is much healthier than during the Great Recession.As part of the seizure, California bank regulators and the FDIC transferred the bank’s assets to a newly created institution — the Deposit Insurance Bank of Santa Clara. The new bank will start paying out insured deposits on Monday. Then the FDIC and California regulators plan to sell off the rest of the assets to make other depositors whole.Information from the Associated Press was used in this report.
Regulators have seized the assets of one of Silicon Valley’s top banks, marking the largest failure of a U.S. financial institution since the height of the financial crisis almost 15 years ago.
Silicon Valley Bank, the nation’s 16th-largest bank, failed after depositors hurried to withdraw money this week amid anxiety over the bank’s health. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008.
The bank served technology workers and venture capital-backed companies, including some of the industry’s best-known brands.
Adrian Mendoza and his wife run Mendoza Ventures, a venture capital firm in Boston.
He says the collapse of California-based Silicon Valley Bank will hit tech communities hard.
“We have the second largest tech ecosystem, following San Francisco,” Mendoza said. “Without capital, without cash, you can’t fund payroll. So, we’re definitely going to see massive job loss.”
SVB’s collapse happened quickly.
“By [Thursday] night, people were pulling dollars out and by 2 p.m., the FDIC walked in and regulators shut the bank down,” Mendoza said.
The nation’s 16th largest bank was hit hard by the downturn in tech stock over the last year, as well as the federal reserve’s plan for aggressive interest rate hikes to combat inflation. As people started pulling out their money, the bank didn’t have the cash to cover.
“The dollars were being pulled faster than the bank actually had,” Mendoza said.
Nearly half of the U.S. technology and health care companies that went public last year after getting early funding from venture capital firms were Silicon Valley Bank customers, according to the bank’s website.
SVB’s situation in Massachusetts is unique, where it has eight Boston branches, six formerly Boston Private Bank.
“It had individual customers,” Massachusetts Secretary of State William Galvin said. “I think there is a genuine concern for our Massachusetts citizens.”
Galvin says that means individuals, not just businesses, have money tied up SVB’s mess.
WCVB saw long lines of people trying to get into Boston-area branches on Friday.
“It’s not a time for panic, but it’s a time for cautious concern, Galvin said.
The White House said Treasury Secretary Janet Yellen was “watching closely.” The administration sought to reassure the public that the banking system is much healthier than during the Great Recession.
As part of the seizure, California bank regulators and the FDIC transferred the bank’s assets to a newly created institution — the Deposit Insurance Bank of Santa Clara. The new bank will start paying out insured deposits on Monday. Then the FDIC and California regulators plan to sell off the rest of the assets to make other depositors whole.
Information from the Associated Press was used in this report.
