The federal government is stepping in as one of the largest banks in America faces a financial collapse.
Silicon Valley Bank was shuttered amid a bank run on Friday, with the California Department of Financial Protection and Innovation taking control of the distressed company.
The state agency appointed the Federal Deposit Insurance Corporation as the receiver of the company, according to an FDIC news release.
Silicon Valley’s stock price collapsed this week as creditors scrambled to withdraw their funds — afraid of the bank’s precarious financial situation.
OOPS! Silicon Valley Bank has been shut by FDIC. All insured depositors will have full access to their insured deposits no later than Monday morning. Shares of SVB crashed 87% over 2 days as fears of a bank run escalated. SVB is a very American mess. https://t.co/ZUyZOAUEXX pic.twitter.com/aOK8bIIEop
— Holger Zschaepitz (@Schuldensuehner) March 10, 2023
The takeover will allow Silicon Valley Bank’s creditors to withdraw federally guaranteed deposits of $250,000 — although there’s no guarantee for holdings that exceed that sum.
Only 2.7% of Silicon Valley Bank deposits are less than $250,000.
Meaning, 97.3% aren’t FDIC insured.
— Genevieve Roch-Decter, CFA (@GRDecter) March 10, 2023
Silicon Valley’s assets have been transferred to the Deposit Insurance National Bank of Santa Clara to ensure that small creditors can access their funds.
The federal intervention doesn’t necessarily mean that Silicon Valley is doomed to go bankrupt.
The federal receivers of the bank plan to reopen it for transactions no later than Mar. 13, according to the statement from the FDIC.
The company’s executives were seeking to raise additional capital to fund a glut of sudden withdrawals this week, according to ABC News.
The bank is the 16th largest in the United States.
Its assets are heavily reliant on California’s technology industry.
The federal takeover of the bank is the largest of its kind since Washington Mutual’s collapse amid the 2008 financial crisis — itself the largest bank in history to fail.
This article appeared originally on The Western Journal.