On Friday, the Federal Deposit Insurance Corporation announced that Silicon Valley Bank had been closed down by regulators, who now have control over the bank’s deposits. While banking activities in all 17 branches of SVB are suspended at the moment, operations will resume on Monday under FDIC supervision. The top priority of the FDIC is to ensure that customers have access to their deposits, with insured depositors having “full access” to their “insured” deposits no later than Monday morning. According to the FDIC, official checks will continue to clear as well.

Uninsured depositors will be paid an advanced dividend within a week, and future dividends may be paid as the FDIC sells SVB’s assets. Deposit insurance, according to the FDIC’s definition, ensures that deposits are insured up to a minimum of $250,000 per depositor, per FDIC-insured bank, per ownership category. It is unclear whether depositors will receive more than this amount. According to the FDIC’s website, when a bank fails:

The FDIC is responsible for insuring deposits in banks, which means that it pays out insurance to depositors up to the insurance limit when a bank fails. This is typically done within a few days after the bank’s closure, with payment being made by either transferring the insured balance of the depositor’s account to a new account at another insured bank or by issuing a check for the insured balance.

However, in certain situations, such as deposits over $250,000 that are linked to trust documents or established by a third-party broker, the FDIC may need more time to determine the amount of deposit insurance coverage. In such cases, the FDIC may request additional information from the depositor in order to complete the insurance determination.

SVB has announced that it lost $1.8 billion due to rising interest rates from the sale of U.S. treasuries and mortgage-backed securities that it had invested in. The bank is now raising more capital and investing in higher-yield products to recover from the loss. However, this announcement caused panic among founders, resulting in a 50% drop in the share price and a rush of withdrawals from clients advised by their VCs to diversify or pull their money out of the bank.

Despite this, SVB CEO Greg Becker assured venture clients in a call that their assets are safe. He explained that the stock sale was an attempt to increase financial flexibility, strength, and profitability at the bank.

According to Becker, SVB has enough liquidity to assist its clients. However, if there is a rumor that the bank is struggling, it could create difficulties. Therefore, he urged his VC clients to remain calm and assured them that SVB has been supporting them for 40 years, including their portfolio companies and venture capitalists.

The FDIC issued a statement today advising customers with accounts exceeding $250,000 to contact them via their toll-free number, 1-866-799-0959.


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