WASHINGTON (Reuters) - Startup-focused lender SVB Financial Group became the largest bank failure since the financial crisis, in a sudden collapse that roiled global markets and stranded billions of dollars belonging to companies and investors.
California banking regulators closed the bank, which did business as Silicon Valley Bank, on Friday and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver for later disposition of its assets.
The main office and all branches of Silicon Valley Bank will reopen on March 13 and all insured depositors will have full access to their insured deposits no later than Monday morning, the FDIC said.
But 89 percent of the bank’s $175 billion in deposits were uninsured as the end of 2022, according to the FDIC, and their fate remains to be determined.
Companies such as video game maker Roblox Corp and streaming device maker Roku Inc said they had hundreds of millions of deposits at the bank. Roku said its deposits with SVB were largely uninsured, sending its shares down 10 percent in extended trading.
Technology workers whose paychecks relied on the bank were also worried about getting their wages on Friday. An SVB branch in San Francisco showed a note taped to the door telling clients to call a toll-free telephone number.
The FDIC said it would seek to sell SVB’s assets and that future dividend payments may be made to uninsured depositors.
At times in the past, the FDIC has moved quickly, even striking deals to sell major banks over the weekend.
SVB did not respond to calls for comment.
The collapse sent shockwaves through the startup community, which has come to view the lender as a source of reliable capital.
The bank’s customers were met with locked doors on Friday. A client dashboard was down, a UK-based client of the bank told Reuters.
Dean Nelson, CEO of Cato Digital, was on a line outside of SVB Santa Clara headquarters, hoping to get answers. Nelson said he was worried about the company’s ability to pay employees and cover expenses.
“Access to the cash is the biggest problem for the majority of the companies here. If you’re a startup, cash is king. The cash and the workflow, to be able to have the runway is critical.”
The problems at SVB, which quickly escalated after the bank said on Wednesday it would raise money, underscore how a campaign by the U.S. Federal Reserve and other central banks to fight inflation by ending the era of cheap money is exposing vulnerabilities in the market. The worries walloped the banking sector.