SVB Shut Down By California Regulator After Bank Stocks Crash Amid Turmoil

Topline

Silicon Valley Bank Financial was closed by a California regulator on Friday amid the ailing firm’s attempts to seek a buyer and raise capital—intensifying turmoil that prompted concerns of possible government intervention and staggering losses at other banks and among cryptocurrencies.

Silicon Valley Bank will explore a sale after its shares plummeted.

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Key Facts

Santa Clara, California-based Silicon Valley Bank was closed Friday morning by the state’s financial regulator, the Federal Deposit Insurance Corporation announced shortly after reports that the bank’s parent company hired advisors to explore a possible sale; the agency said insured depositors will have “full access” to their insured deposits no later than Monday morning.

Shares of SVB Financial were halted Friday morning after they fell by more than 64%—after already plunging by 60% Thursday—following an announcement the lender had lost $1.8 billion after selling securities worth $21 billion.

The S&P Select Banks Index at one point fell more than 3% Friday and 14% over the last five days, including declines with the Dow Jones Industrial Average (0.2%), the S&P 500 (0.7%) and Nasdaq (0.9%), after four of the largest U.S. banks lost $52 billion in market value Thursday.

Though they pared losses, other banks, including Goldman Sachs (2.5%) and Bank of America (0.6%), also posted declines Friday—though JP Morgan is up 1.7%.

Issues with SVB Financial—in addition to the liquidation of the crypto banking giant Silvergate Capital—have caused bitcoin and ether prices to drop 11% and 10% over the last five days, respectively.

Billionaire Bill Ackman, CEO of Pershing Square Capital Management, suggested in a series of tweets Friday that the government should provide a “highly dilutive” bailout to prevent the collapse of an “important long-term driver of the economy.”

Big Number

$212 billion. That’s how much SVB Financial reported in assets for the fourth quarter of 2022.

Crucial Quote

CEO Greg Becker urged the bank’s clients to “stay calm” and assured them that the bank has “ample liquidity” during a conference call Thursday, according to The Information.

Surprising Fact

As financial stocks fell on Friday, San Francisco-based First Republic Bank was among those hardest hit. Shares of the bank, which some startup founders reportedly flocked to amid concerns about SVB’s liquidity, fell as much as 50% before paring losses to 20% by 12 p.m. ET.

Key Background

SVB Financial’s shares plunged following an announcement it would seek to raise $2.25 billion in capital by selling a combination of common and preferred stocks. An effort to sell securities and stock was pursued because the bank had received “lower deposits than forecasted,” according to the firm. Companies backed by the venture capital firm Founders Fund were subsequently urged to remove their money from their bank as there was “no downside” to a withdrawal, according to Bloomberg, as some founders have reportedly already moved their funds to other lenders like First Republic and Brex. Amid the ongoing financial troubles, other customers faced problems moving funds out of the bank because of issues on SVB’s website, which prevented logins and withdrawals. Despite the bank’s plunging shares, some venture capitalists and tech executives—including Elon Musk—have expressed their support for the lender.