FDIC Moves SVB Deposits to National Bank of Santa Clara
Federal regulators have transferred all deposits from the failed Silicon Valley Bank to a new “bridge bank.”
The Federal Deposit Insurance Corporation (FDIC) said in a news release that all Silicon Valley Bank depositors will have access to their funds Monday (March 13) morning when the bridge bank “opens and resumes normal banking hours and activities, including online banking.”
The FDIC last week created the National Bank of Santa Clara to protect depositors in the wake of Silicon Valley Bank’s (SVB) fast-moving collapse last week, one of the largest banking failures in U.S. history.
Regulators spent the weekend scrambling to find a buyer for SVB, offer protection to depositors and stave off a larger banking crisis, while also dealing with a second banking failure, that of New York’s Signature Bank.
Late Sunday, the FDIC, U.S. Treasury and Federal Reserve issued a joint statement that announced all deposits for both banks would be covered.
In the case of SVB, depositors and borrowers automatically become customers to the FDIC’s “bridge bank” and “will have customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before,” the FDIC said.
The agency adds that it has named Tim Mayopoulos, former president and CEO of the National Mortgage Association, to serve as chief executive of the bridge bank. The FDIC has removed SVB’s senior management, and shareholders and “certain unsecured debt holders” will not be protected by the rescue plan.
If the FDIC hadn’t come through, PYMNTS’ Karen Webster wrote Monday, SVB’s failure would have triggered other failures, those of some of the struggling startups that bank there.
“The larger tragedy would have been the hit to the innovators with great businesses and solid business models with real prospects for profitable growth and scale,” Webster writes.
“The ones working the phones last weekend trying to figure out whether they could survive without the capital they needed to run their businesses and the infrastructure they used at the bank to power their businesses and support their clients. Happily, they will live to see another day, too.”
However, PYMNTS also noted last week that — no matter how the SVB story plays out — venture capital (VC) will feel a long-term impact, as the cash burn that startups have faced will force VC firms to ponder whether valuations have been too high.
“After all, the VCs depend on returns on their investments and attracting new backing to keep their activities afloat,” PYMNTS wrote. “A chilling effect on investments would force the startups to seek new ways to keep their efforts and operations ongoing, which may spark deal-making in the form of mergers and acquisitions or outright sales.”