According to a Friday regulatory filing, investors and depositors attempted to withdraw $42 billion from Silicon Valley Bank on Thursday, in one of the largest US bank runs in more than a decade.
According to an order taking control of the bank issued Friday by California’s bank regulator, the Department of Financial Protection and Innovation, the bank had a negative cash balance of $958 million at the end of business on March 9.
The ruling shows how bad the bank run was, which is why the state regulator put the bank in the hands of the FDIC as a receiver.The volume of withdrawals was so great that the bank ran out of cash and the means to get it.
According to the California regulator, when the Federal Reserve delivered its cash letter — a list of checks and other transactions for the bank to handle — to SVB, it did not have enough money to satisfy it.
“Despite efforts by the bank, with the support of regulators, to move collateral from different sources, the bank failed to satisfy its cash letter with the Federal Reserve,” stated Commissioner Clothilde Hewlett in her ruling.
Venture withdrawals
Greg Becker, the CEO of Silicon Valley Bank, sent a letter to the bank’s shareholders on Wednesday, which sparked the run.The bank had incurred a $1.8 billion loss on the sale of US treasuries and mortgage-backed securities and had proposed a $2.25 billion capital raising to shore up its finances.
Clients, including several of the bank’s venture-capital businesses, quickly attempted to withdraw their funds. According to persons familiar with the situation, Peter Thiel’s Founders Fund, Coatue Management, Union Square Ventures, and Founders Collective all encouraged their firms to withdraw their funds from the bank.
The bank regulator said that depositors and investors took out $42 billion on Thursday alone.Despite being in good financial standing prior to Thursday, the California comptroller claimed the run “caused the bank to be unable of meeting its obligations as they fell due,” and the bank was now insolvent.
The bank was subsequently closed by the California DFPI and put under FDIC receivership, marking the largest bank failure in the United States since the financial crisis.
