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 SVB and immediately took possession of all deposits at the bank. The bank had $209 billion in assets and $175.4 billion in deposits at the time of failure, the FDIC said in a statement. It was unclear how much of the deposits amount was above the $250,000 insurance limit at the moment, per the AP.
The financial health of Silicon Valley Bank had been increasingly in question this week after the bank announced plans to raise up to $1.75 billion to strengthen its capital position amid concerns about higher interest rates and the economy. CNBC reported that attempts to raise capital had failed, and that the bank had been looking to sell itself. There were also media reports that depositors were rapidly pulling funds out of the bank, potentially setting up a bank run. Shares of SVB Financial Group, the bank's parent company, plummeted nearly 70% Friday before trading was halted ahead of the Nasdaq's opening bell.
SVB wasn't a small bank: It was the 16th largest bank in the country, holding $210 billion in assets. It acted 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 reportedly being advised to pull at least two months' worth of "burn" cash out of Silicon Valley Bank to cover their expenses. Typically, VC-backed companies aren't 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.
Silicon Valley was heavily exposed to the tech industry, and there's little chance of contagion in the banking sector as a whole, with major banks holding sufficient capital to avoid a similar situation. 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%. (Read more banks stories.)