FDIC takes over Silicon Valley Bank

This article was last updated on March 11, 2023

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FDIC takes over Silicon Valley Bank

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits, examines and supervises financial institutions for safety, soundness, and consumer protection, and makes large and complex financial institutions.

In this context, the FDIC has taken over the Silicon Valley Bank, a start-up bank that is located in the Californian heart of the American tech industry, as it was struggling with too little capital. The share price fell by about 60 percent, and trading in the stock was halted today when it went wrong again. Customers with credits of up to $ 250,000 are insured, and anyone with more money is requested to contact the FDIC by phone.

When a bank is technically bankrupt, as is now the case with Silicon Valley Bank, US regulators look for a major competitor to take over the bank to limit the damage as much as possible. However, the question is whether that will work before the financial markets reopen on Monday. Investors fear that this could be the start of a new banking crisis, as evidenced by the fall in the prices of all banks, not only in the US, but also in Europe.

SVB, with USD 215 billion under management, is a medium-sized bank that has grown into a very important financier of start-ups and venture capitalists in the tech industry since the 1990s. According to Janneke Niessen, founder of investment fund Capital T, the biggest question is whether tech companies can still access their current loans from Silicon Valley Bank. “If that is not the case, tech companies will also collapse,” she says.

For the time being, the effect for tech companies is still minor, but many are internationally active, and the investment climate was already difficult. The winter will get even colder, also here.

In summary, the FDIC has taken over the Silicon Valley Bank, a medium-sized start-up bank that has grown into a very important financier of start-ups and venture capitalists in the tech industry since the 1990s. The bank was struggling with too little capital, and customers with credits of up to $250,000 are insured.

US regulators are looking for a major competitor to take over the bank to limit the damage as much as possible before the financial markets reopen on Monday. The fall in the prices of all banks, not only in the US, but also in Europe, has raised fears that this could be the start of a new banking crisis. The biggest question is whether tech companies can still access their current loans from Silicon Valley Bank, as their collapse would have significant consequences for the tech industry.