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Regulators take over Silicon Valley Bank, citing poor 'liquidity and insolvency' | American Banker

After the bank's announcement on Wednesday, the situation unraveled quickly. On Thursday there were reports that Founders Fund, the venture capital fund co-founded by Peter Thiel, was advising companies to withdraw their money from Silicon Valley Bank.

But between the end of 2021 and Feb. 28, 2023, Silicon Valley Bank's on-balance-sheet deposits had already fallen from around $210 billion to $160 billion, according to Gary Tenner, an analyst at D.A. Davidson.

The bank's decision to sell a large securities portfolio and raise capital put it in a dif cult position, Tenner said Friday.

"Obviously the market was not receptive to their capital raise, to put it lightly," Tenner said.

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The collapse of Silicon Valley Bank was the rst bank failure in nearly two and a half years. The last FDIC-insured institution to fail was the $70 million-asset Almena State Bank in Kansas on Oct. 23, 2020, according to the FDIC's website ; its estimated cost to the Deposit Insurance Fund was $16.8 million.

Jaret Seiberg, an analyst at TD Cowen, said that Silicon Valley Bank's abrupt collapse stemmed from its unusually large exposure to interest rate risk.

"Silicon Valley had a unique business model that was less dependent on retail deposits than a traditional bank," Seiberg wrote in a note to clients. "This left the bank more exposed to interest rate risk as its funding got more expensive, but its assets were not repricing higher."

The San Francisco Home Loan Bank, which lent $13.5 billion to Silicon Valley Bank in the third quarter of 2022 , is rst in line among creditors.

https://www.americanbanker.com/news/regulators-take-over-silicon-valley-bank-citing-poor-liquidity-and-insolvency

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