Giada Amendolara '25
On Friday, March 10, Silicon Valley Bank, the 16th largest bank in the United States, collapsed and was taken over by the FDIC. State regulators also closed the New York-based Signature Bank.
According to CNN, the collapse occurred after a “run on the bank” the previous Wednesday and customers withdrew $42 billion of deposits by the end of Thursday, leaving the bank with $1 billion in negative cash balance. This resulted in a race to withdraw funds, which House Financial Services Chair Patrick McHenry later described as, “the first Twitter-fueled bank run.”
A bank run happens when too many customers withdraw all their money simultaneously from their deposit accounts with a banking institution, typically out of fear.
Silicon Valley Bank started in 1983 as a small community bank, mainly serving start-up tech companies. The New York Times reported that “Silicon Valley Bank’s downward spiral accelerated with incredible speed this week, but its troubles have been brewing for more than a year.”
Signature Bank, founded in 2001, had 40 branches, assets of $110.36 billion and deposits of $88.59 billion at the end of 2022, according to a regulatory filing. “We had no indication of problems until we got a deposit run late Friday, which was purely contagion from SVB,” former representative and Signature Bank board member Barney Frank told CNBC in a phone interview. Many Signature Bank customers moved their deposits to bigger banks.
According to a joint statement released by the Federal Reserve, the Department of the Treasury and Federal Deposit Insurance Corporation (FDIC), “All deposit accounts at Silicon Valley Bank and Signature Bank in New York will be guaranteed.”
The FDIC was created in 1933 and is an independent agency of the United States government that protects bank depositors against the loss of their insured deposits in the event that an FDIC-insured bank or savings association fails.
President Biden spoke on Monday morning to prevent a banking crisis and maintained “Americans can rest assured that our banking system is safe.” The New York Times also reported that President Biden issued a statement stating that “All customers who had deposits in these banks can rest assured they will be protected and they’ll have access to the money as of today.”
Comments