U.S. regulators rushed to seize the assets of Silicon Valley Bank on Friday after a run on the bank, marking the largest failure of a financial institution since Washington Mutual collapsed at the height of the financial crisis more than a decade ago.
Silicon Valley Bank, the nation's 16th largest bank failed after its depositors -- mostly technology workers and venture capital-backed companies -- hurried to withdraw money this week as anxiety over the bank's health spread. It is the second biggest bank failure in U.S. history.
Silicon Valley was heavily exposed to tech industry but there is little chance of chaos spreading in the broader banking sector like in the months leading up to the Great Recession more than a decade ago. The biggest banks -- those most likely to cause a widespread economic meltdown -- have healthy balance sheets and plenty of capital.
Shortly before noon eastern, the Federal Deposit Insurance Corporation moved to shutter the bank. Notably, the FDIC did not wait until the close of business to seize the bank, as is typical in an orderly wind down of a financial institution. The FDIC could not immediately find a buyer for the bank's assets, signalling how fast depositors had cashed out.
The bank still appeared stable this year, but on Thursday it announced plans to raise up to US$1.75 billion in order to strengthen its capital position. That sent investors scurrying and shares plunged 60%. They rocketed lower again Friday before the open of the Nasdaq, where it is traded. Bill Tyler, the CEO of TWG Supply in Grapevine, Texas, said he first realized something was wrong when his employees were texting him at 6:30 a.m. Friday that they didn't receive their paychecks. TWG, which has just 18 employees, had already sent the money for its paychecks to a payroll services provider, Rippling PEO, which had used Silicon Valley Bank. He was scrambling to figure out how to pay his workers.
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