SANTA CLARA, Calif. -- Regulators ordered Silicon Valley Bank to be shut down and it has become the second-largest bank failure in U.S. history since Washington Mutual in 2008.
The bank failed after depositors -- mostly technology workers and venture capital-backed companies -- began withdrawing their money, creating a run on the bank.
In San Francisco on Friday, some people were distraught about the closure of Silicon Valley Bank and were hoping to withdraw money from their accounts. Others were confused, saying they wondered how this shutdown could happen so suddenly.
"It seems like very sudden. Maybe we should give it some time to let things settle out," said startup owner Xian Ke. "There is FDIC insurance (for accounts) up to $250K, so I don't know how many people are affected. My balance is insured. I wasn't super worried."
Startup founder Saureen Shah does not bank with SVB but he said, "We are working on diversifying where we want to put our funds right now."
Regulators took over Silicon Valley Bank this Friday morning.
It was a surprise move after shares of its parent company, SVB Financial, plunged more than 60% this week.
The bank had $209 billion in assets and $175.4 billion in deposits at the time of failure, the FDIC said in a statement. It was unclear how much of the deposits was above the $250,000 insurance limit at the moment.
Silicon Valley was heavily exposed to tech industry and there is little chance of contagion in the banking sector as there was in the months leading up to the Great Recession more than a decade ago. Major banks have sufficient capital to avoid a similar situation.
"The bank communicated a few days ago that it would have to support some of its asset base, sell off some of its assets that are not under the price that they had paid for it-- these assets," said Professor Olaf Groth, UC Berkeley Haas School of Business.
Groth said the assets are now underwater and Silicon Valley Bank had to sell them off.
"The other problem, is the bank so hopelessly overexposed on cash from all of these entrepreneurs. Ninety-six percent of all its asset base is based on cash from startups," he said.
If you bank or do business with SVB, Groth says there are some important things to consider.
VIDEO: Customers concerned about deposits after Silicon Valley Bank collapse
"Try to keep calm. The situation's not helped by the panic that the currently unfolding. Let the regulators do their work. Let the bank management do their work. We're going to have to restructure and work this bank out. But quick and hasty withdrawal of everything at this point is not helping anybody," Groth said.
Silicon Valley bank was not a small bank, it's the 16th largest bank in the country, holding $210 billion in assets. It acts as a major financial conduit for venture capital-backed companies, which have been hit hard in the past 18 months as the Federal Reserve has raised interest rates and made riskier tech assets less attractive to investors.
Venture capital-backed companies were being reportedly advised to pull at least two months' worth of "burn" cash out of Silicon Valley Bank to cover their expenses. Typically VC-backed companies are not profitable and how quickly they use the cash they need to run their businesses - their so-called "burn rate" - is a typically important metric for investors.
Diversified banks like Bank of America and JPMorgan pulled out of an early slump due to data released Friday by the Labor Department, but regional banks, particularly those with heavy exposure to the tech industry, were in decline.
Yet it has been a bruising week. Shares of major banks are down this week between 7% and 12%.
Customers desperate for answers came to the Silicon Valley Bank branch in Menlo Park to learn the fate of their money after the Federal Deposit Insurance Corporation seized all assets following the SVB collapse.
Only members of the FDIC were on-site Friday. They explained to customers that the bank will reopen on Monday, at which point customers can get back their money up to $250,000, the insured amount by the FDIC. Customers with more in SVB will receive a receivership certificate for the remaining amount of their uninsured funds.
However, the reality is, anyone or startup with more than the insured $250,000 may or may not get that money back. According to SEC filings, that's roughly 95% of money deposited into SVB or more than $150 billion.
"The bank was instrumental to the whole valley, to many, many start-ups," Instock.com's Yego Anchyshkin said. "Not only in Silicon Valley, but all over the U.S. and other countries. Some people may worry, but we prefer not to worry too much, but to think about the best course of action."
"Let's see what happens Monday, that's about it," Refiberd's Sarika Bajaj said. "Hopefully everything works out. But, we'll see."
The Associated Press contributed to this report.
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