March 13, 2023
On Friday, March 10, 2023, regulators shut down Silicon Valley Bank (“SVB”) and seized its deposits, resulting in the second largest U.S. banking failure since the 2008 financial crisis. Specifically, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (the “FDIC”) was named receiver. Since the FDIC insures deposits of up to $250,000, that amount was immediately available; however, the fact that deposits above and beyond the $250,000 limit were not immediately available alarmed many. After a weekend of chaos as many businesses scrambled for a solution to the illiquid funds, on Sunday, March 12, 2023, in a joint release among the Department of Treasury, Board of Governors of the Federal Reserve System and the FDIC, Treasury Secretary Janet Yellen instructed the FDIC to guarantee SVB customers access to all deposits, including the uninsured funds. The release further stated that New York-based Signature Bank was closed by its chartering authority and that its customers would also receive access to all deposits, including the uninsured funds. While this may have provided relief to many, it is important to keep in mind the lesson and best practices in the event of such a liquidity crunch.