Silicon Valley Bank is the first FDIC-insured bank to fail in 2023

Silicon Valley Bank (SVB) was shut down on March 10 by California’s state banking regulator and put under the control Federal Deposit Insurance Corp., which promised to give insured depositors access to their money by the morning of March 13 and will attempt to return funds to uninsured depositors as the agency sells off the bank’s assets.

SVB ran into trouble earlier this week when its venture capital-backed clients started to pull their deposits, after the bank reported $1.8 billion in losses from a bond firesale. The bank attempted to fundraise to cover the loss, and also attempted to find a buyer, all while deposits were rushing out of the bank.

Adding to SVB’s pain, Bloomberg reported that Peter Thiel’s venture capital firm, Founders Fund, advised companies to withdraw money from the bank.

Unlike Silvergate Bank, which also announced a shutdown this week after faltering in the wake of the crypto industry’s woes, SVB’s client list was not concentrated in crypto. But its venture capital-dependent customers were burning through cash at a faster pace, as rising interest rates have made borrowing more expensive and put pressure on the markets.

That same environment was bad news for SVB’s portfolio of securities; it couldn’t sell enough bonds, at a high enough price, to recoup the funds needed to repay depositors who were pulling their money from the bank.

As a result, even after adjusting for inflation, SVB has just become the US’s second-biggest bank failure in history, based on assets on the books at the time of failure.

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