Silicon Valley Bank, lender to some of the biggest names in start-up technology world, became the largest bank to fail since the 2008 financial crisis.
The California Department of Financial Protection and Innovation shut down Silicon Valley Bank on Friday, less than two days after the bank tried to persuade clients not to pull their money over concerns it was running low on available cash. The regulator appointed the Federal Deposit Insurance Corp. as the receiver.
According to a Friday regulatory filing, Investors and depositors tried to pull $42 billion from Silicon Valley Bank on Thursday. On March 9, at the close of business, the bank had a negative cash balance of $958 million, according to an order taking possession of the bank filed Friday by California’s bank regulator.
As per the Bloomberg report, the order shines light on the scale of the bank run faced by the lender, which was placed into Federal Deposit Insurance corporation receivership by the scale regulator.
The focus point is that the scale of withdrawals was so large that the bank ran out of cash and ways to get it.
As per the California regulator, when the Federal Reserve sent its cash letter, a list of checks and other transactions for the bank to process, SVB failed to pull together enough currency to meet it.
“Despite attempts from the bank, with the assistance of regulators, to transfer collateral from various sources, the bank did not meet its cash letter with the Federal Reserve,” the order from Commissioner Clothilde Hewlett said.
The run for withdrawals was sparked by a letter that Silicon Valley Bank Chief Executive Officer Greg Becker sent to shareholders. As per the Bloomberg report, the bank had suffered a $1.8 billion loss on the sale of US treasuries and mortgage-backed securities and outlined a plan to raise $2.25 billion of capital to shore up its finances.
The regulators pointed out that the customers immediately tried to pull their money, including many of the venture-capital firms the bank had cultivated over decades.
Regulators reported that the withdrawals initiated by depositors and investors amounted to $42 billion on Thursday alone.
