Silicon Valley banks drained $42 billion in deposits
The collapse of the Silicon Valley bank was triggered by a massive run on the bank, with customers beginning to withdraw $42 billion this week.
The bank was taken over by the Federal Deposit Insurance Corporation on Friday after the California Department of Financial Protection and Innovation (DFPI) found the bank insolvent.
According to the DFPI, the bank was in “sound financial condition” prior to the operation. Customers withdrew $42 billion, leaving the bank with a negative cash balance of $958 million.
Summary of events since DFPI took over the bank:
On March 8, 2023, the Bank announced a loss of approximately $1.8 billion on the sale of investments (US Treasury bills and mortgage-backed securities). On March 8, 2023, the Bank Holding announced that the capital increase would be carried out. Despite the bank’s financial health up until March 9, 2023, investors and depositors responded by beginning to withdraw $42 billion in deposits from the Bank on March 9, 2023, causing protests against the Bank. As of the close of business on March 9, the bank had a negative cash balance of approximately $958 million. Despite efforts by the Bank to transfer collateral from various sources with the help of regulators, the Bank was unable to meet its cash holdings at the Federal Reserve. The hasty withdrawal of deposits has resulted in the Bank not being able to pay its obligations on time, and the Bank is now insolvent.
Before its collapse, the Silicon Valley bank was the 16th largest bank by assets, according to data from the US Federal Reserve, which showed the bank had $209 billion in assets as of December 31, 2022.
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