California regulators on Friday said they were shutting down Silicon Valley Bank, a favorite of the tech sector.
The California Department of Financial Protection and Innovation announced that it was taking over and closing the distressed bank in an effort to protect deposits.
The Federal Deposit Insurance Corporation is the bank’s receiver. The FDIC has formed a separate entity where all insured bank deposits are being transferred.
On Thursday, shares of Silicon Valley Bank plunged after it announced plans to shore up its finances. SVB saw its biggest one-day stock drop on Thursday, plunging more than 60% during trading and then another 20% in after-hours trading. Afterward, the bank had announced a $2.25 billion share sale to boost its finances.
Amid the slide, some start-ups who had money deposited with SVB were advised to withdraw funds.
“It’s crazy how it’s just unravelled like this,” Hannah Chelkowski, founder of Blank Ventures, told the BBC on Thursday. She added that SVB had been “the most start-up friendly bank” throughout the Covid pandemic.
SVB’s closure marks the biggest bank failure since the 2008 financial crisis that led to the Great Recession. According to the FDIC, it’s the second-largest collapse on record after “too big to fail” Washington Mutual did indeed fail during the 2008 financial meltdown.
In the wake of SVB’s collapse, Treasury Secretary Janet Yellen told House lawmakers Friday morning, “There are recent developments that concern a few banks that I’m monitoring very carefully, and when banks experience financial loss it is and should be a matter of concern.”