United States regulators pulled the plug on Silicon Valley Bank on Friday in a spectacular move that sent global banking shares sputtering, as markets fretted over possible contagion from America’s biggest banking failure since the 2008 financial crisis.
US authorities swooped in and seized the assets of SVB, a key lender to US startups since the 1980s, after a run on deposits made it no longer tenable for the medium-sized bank to stay afloat on its own.
Little known to the general public, SVB specialized in financing start-ups and had become the 16th largest US bank by assets: at the end of 2022, it had $209 billion in assets and approximately $175.4 billion in deposits.
Its demise represents not only the largest bank failure since Washington Mutual in 2008, but also the second largest failure ever for a retail bank in the United States.
In response to the sudden collapse, Treasury Secretary Janet Yellen convened an emergency meeting of top US banking regulators.
“Secretary Yellen expressed full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient and regulators have effective tools to address this type of event,” a Treasury statement said.
Based in the shadow of the world’s biggest tech companies, SVB’s travails have raised fears that more banks may face doom as the fallout from high inflation and hiked interest rates squeezes weaker lenders.
In front of the SVB headquarters on a rainy day in Santa Clara, California, nervous customers spoke in small groups wondering how they could withdraw their money as news spread of the government seizure.
One customer dressed in a t-shirt and sweatpants, and who spoke on condition of anonymity, said he used the bank for payroll at his startup.
“It’s not a good situation. A lot of really top tier (venture capital firms) have very high amounts of exposure here,” he said, adding that he was worried for his employees.