California banking regulators on Friday closed SVB Financial Group, putting the tech-heavy lender into receivership, and will dispose of its assets, moving quickly to protect depositors as a crisis rippled through global markets and hit banking stocks.
It marks the largest bank failure since Washington Mutual during the height of the 2008 financial crisis.
“Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver,” a statement from regulators read.
Silicon Valley Bank is the first FDIC-insured institution to fail this year.
The move comes after SVB Financial Group was exploring options, including a sale, after its efforts to raise capital through a stock sale failed and affected markets.
Shares of SVB were halted on Friday after tumbling as much as 66 per cent in pre-market trading.
Silicon Valley Bank had about $209 billion in total assets and about $175.4 billion in total deposits, as of December 31, 2022.
Treasury Secretary Janet Yellen told lawmakers on Capitol Hill on Friday that the department was aware of recent developments and was monitoring the situation, calling it “a matter of concern” when banks experience losses.
Ms Yellen later met regulators to discuss the bank.
"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," the Treasury Department said.
US regulators were observed arriving at the bank's California offices on Friday, Bloomberg News reported.
The main office and all branches of Silicon Valley Bank will reopen on March 13 and all insured depositors will have full access to their insured deposits no later than Monday morning, according to the statement.
FDIC-insured funds are covered up to $250,000 and there are concerns that a large amount of accounts at SVB hold more than that amount.
Technology workers whose pay cheques relied on the bank were worried about getting paid on Friday. An SVB branch in San Francisco displayed a note in the window telling clients to call a toll-free telephone number.
"I’m working with my CA colleagues to address the Silicon Valley Bank crisis," tweeted Eric Salwell, who represents a California district near where SVB is headquartered.
"We must make sure all deposits exceeding the FDIC $250k limit are honored. Banking is about confidence. If depositors lose confidence on the safety of their deposits over 250k, then we are in trouble."
The White House said it had faith and confidence in US financial regulators, when asked about the failure of SVB. Cecilia Rouse, who heads the Council of Economic Advisers, said the US banking system was fundamentally stronger than it was during the 2008 financial crisis.
The start-up-focused lender had 17 branches in California and Massachusetts.
Agencies contributed to this report
