United States · Banking

Silicon Valley Bank insolvency: proceedings and outcome

Silicon Valley Bank, a California state-chartered bank based in Santa Clara, was closed by the California Department of Financial Protection and Innovation on 10 March 2023, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC moved deposits to a bridge bank and later agreed a sale of deposits and loans to First-Citizens Bank and Trust Company. The parent company, SVB Financial Group, filed separately for Chapter 11.

Sold as going concern The bank's deposits and loans were sold from the FDIC-operated bridge bank to First-Citizens Bank and Trust Company. The FDIC estimated the cost to the Deposit Insurance Fund at about 20 billion USD, with the final figure to be set when the receivership terminates. The receivership pays allowed claims, after administrative expenses, to depositors, general unsecured creditors, subordinated debt and stockholders in that order.^2,5,3

Figures as stated by the FDIC at closure. Figures as of 31 December 2022.¹

Proceedings

Timeline

1. 10 March 2023The California Department of Financial Protection and Innovation closed Silicon Valley Bank and appointed the FDIC as receiver.^1,2
2. 13 March 2023The FDIC transferred all deposits to Silicon Valley Bridge Bank, N.A., a bridge bank it operated.²
3. 17 March 2023Parent company SVB Financial Group filed for Chapter 11 in the Southern District of New York. It said the bridge bank was under FDIC jurisdiction and not included, and reported about 3.3 billion USD of unsecured notes.^4,3
4. 27 March 2023First-Citizens Bank and Trust Company assumed all deposits and loans of the bridge bank under a purchase and assumption agreement with the FDIC, and the branches reopened as First-Citizens on 27 March 2023. The FDIC said First-Citizens bought about 72 billion USD of assets at a discount of 16.5 billion USD and estimated the cost of the failure to the Deposit Insurance Fund at about 20 billion USD. Reuters reported about 56 billion USD of deposits.^5,3
5. 10 July 2023Deadline set by the FDIC as receiver for filing claims.²

Sources

1. Federal Deposit Insurance Corporation, FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank, Santa Clara, California (10 March 2023)
2. Federal Deposit Insurance Corporation, Silicon Valley Bank (failed bank information)
3. Reuters (via StreetInsider), First Citizens agrees to buy collapsed Silicon Valley Bank (27 March 2023)
4. US Securities and Exchange Commission (EDGAR), SVB Financial Group press release on Chapter 11 filing (Form 8-K Exhibit 99.1) (17 March 2023)
5. Federal Deposit Insurance Corporation, First-Citizens Bank and Trust Company to assume all deposits and loans of Silicon Valley Bridge Bank, N.A. (press release) (March 2023)