Silicon Valley Bank: What To Know About the 2nd Largest Bank Failure in US History

Silicon Valley Bank, Santa Clara, California (“SVB”), was closed today by the California banking authority and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. This situation is fluid and relatively little information is available other than the FDIC’s press release issued this morning. Based on that press release:

1. The FDIC created a bridge bank called the Deposit Insurance National Bank of Santa Clara (“DINB”).

2. At the time of closing, the FDIC as receiver immediately transferred to DINB all insured deposits of SVB.

3. All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023.

4. The FDIC will pay uninsured depositors an advance dividend by Friday, March 17, 2023. Uninsured depositors will then receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of SVB, future dividend payments may be made to uninsured depositors.

5. Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-866-799-0959.

6. The main office and all branches of SVB will reopen on Monday. DINB will maintain SVB’s normal business hours.

7. Banking activities will resume no later than Monday, including on-line banking and other services.

8. SVB’s official checks will continue to clear.

9. The FDIC as receiver will retain all the assets from SVB for later disposition.

10. Loan customers should continue to make their payments as usual.

Based on the timing of the press release, it appears that SVB was closed before or during its normal business hours today. As a result, there was really little opportunity for SVB customers to plan for SVB’s demise, and we’ve already been contacted by several customers of SVB who likely had deposits at SVB exceeding the $250,000 deposit insurance threshold per depositor (“Uninsured Depositors”).

It appears that all online services for SVB are not accessible and all physical branches are likely closed. So there’s no way to do business with the bank today.

Moving money out of any accounts at the time of SVB’s receivership (the “Receivership Time”) and into another bank is not an option that will help Uninsured Depositors.

Based on the press release, Uninsured Depositors should have access to their insured deposits at the Receivership Time (up to $250,000) at DINB on Monday morning.  In addition, any new funds that come in to an Uninsured Depositor’s deposit accounts at DINB after the Receivership Time should be processed by DINB in the ordinary course and should be available to those customers at the usual times under the Expedited Funds Availability Act.

With respect to any loans, the FDIC has not stated whether it will honor any lines of credit or letters of credit issued by SVB, only that the FDIC will retain those assets for disposition at a later time.  SVB’s borrowers should find their loan documents and provide them to counsel.

We intend to monitor the situation and update this note as additional information becomes available.  We hope that the FDIC will release the agreement by which SVB’s deposits (and assets, as applicable) were transferred by DINB after business hours today.