California’s largest bank’s success turned into a colossal crisis. The Silicon Valley Bank (SVB) is now leading to be the second largest bank failure in U.S history since 2008. A panic three weeks ago led SVB depositors to withdraw money.
While clients withdraw and transfer their accounts, shortcomings in cash back from SVB feed into an already nervous situation. Customers with deposits up to $250,000 will receive a guaranteed check insured by the FDIC.
There was no guarantee for depositors that had a greater amount to fully get their complete money back. But the former House Democratic lawmaker’s took immediate action, and according to The Guardian news source, they named the 2010 Dodd-Frank Act, which tightened banking regulations following the global financial crisis (Chris Stein, 2023).
As for clients that have more than $250,000, the Federal Reserve reported that it was brewing a new lending facility for the nation’s banks to protect clientele and block other small and regional banks from collapsing.
Conspiracy theories spiraled and fueled another wave of anxiety, as Americans began to question “Will we be experiencing 2008 all over again?.”
After interviewing with Heshan Demel, head of Bank Risk Management and 20 years of experience in the banking industry, he said
“There is no pending systematic risk because it’s not a problem in the banking system. There could be other banks that could be a risk in that sector but nothing close to what happened in 2008.”
SVB investors will not receive any compensation for losses because they are part of the free market. The government’s main concern is about the consumer and depositors, not the shareholders.
The FDIC transferred all deposits and substantially all assets from Silicon Valley Bank to Silicon Valley Bridge Bank, a full-service bank operated by the FDIC to market the institution to potential bidders (fdic.gov), in order to protect current depositors.
Since SVB is the 16th largest bank it will have a rippling effect. It is to no surprise it will take a while to regain the people’s confidence in the banking system. The consequence of that has already taken action. Which is why people are moving their money to bigger banks like Citibank or Chase.
At the moment, we don’t know the total number of clients that have officially transferred. Other news sources report that large U.S. banks are seeing an influx of new clients since the shutdown of SVB.
“For the depositor I would say when you start panicking you start making hash decisions. Stay alert and keep yourself updated on what’s going on in the banking system,” said Demel.
The business, which was open for only two years in Miami’s Brickell Financial District. The business completely shut down on March 11, 2023. The space is now ready to be rented to a new business.
What does this mean for the clients in South Florida that have open accounts with this bank?
The SVB is a business bank, therefore it handles big custom accounts. Which means the money will be there but it is not entirely necessary to go to the branch. The physical branch was there to build physical relationships.
Although the Miami location no longer exists, the FDIC has confirmed that the client’s money is safe. Depositors can still access their accounts and conduct transactions online or over the phone.
For more information about the FDIC Acts To Protect All Depositor of Former SVB, please visit: www.fdic.gov
