How Silicon Valley Bank’s failure could spark a run on regional banks

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The Silicon Valley bank failure could spark a spate of other regional and mid-sized banks across the country if wealthy individuals rush to pull their money out of accounts with values ​​too high for FDIC coverage and flee to larger institutions amid the scare. But it is a risk for all. Most large institutions could go systemic, sources reportedly told the New York Post.

Silicon Valley bank branches shut down by regulator in biggest bank failure since Washington Mutual

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“Smaller regional banks are done,” an unnamed banking source reportedly told the New York Post. “Everybody wants to put their money in JP Morgan JPM,
or Bank of America BAC,

If a buyer steps in to scoop up SVB Financial Group SIVB’s assets later this week,
One that caters to startups in tech and other industries would likely avert a disaster.

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But potential buyers are apprehensive about taking over the collapsed bank without the backing of the federal government. Unless the government steps in, there is too much uncertainty and risk associated with a deal, people with knowledge of the thinking of potential buyers reportedly told the New York Post.

“My instincts are either that someone buys the whole thing with the concessions [the] Government or it goes into receivership,” a banker close to the talks reportedly told the Post.

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The Silicon Valley bank was shut down by California regulators on Friday and placed into receivership with the Federal Deposit Insurance Corp.

“No one wants to do a deal without a government backstop,” said a private-equity insider. “The government needs to design a deal, like they did with Lehman.”

Another banker pointed out that the collapse of Lehman Brothers in 2008 is still tied to its failure nearly 15 years later.

“No one wants to have that kind of headache,” said the private-equity insider.

A top investment bank sent a note to clients advising them of what could happen if a Silicon Valley bank buyer doesn’t materialize, according to a transcript reviewed by the New York Post.

The note outlines how the FDIC is spending the weekend assessing the value of SVB’s assets. It will pay up to $250,000 in insurance coverage on Monday for accounts at that level or below. The agency will also make payments called advanced dividends to uninsured depositors as soon as possible.

“It may take 60 days to 2 years to pay the balance,” the note said. Ultimately, SVB customers could receive 80 to 90 cents for every dollar they deposited, but this could take years.

And for many small businesses with tight ties to the bank, it may be too late.

The wrangling behind the scenes on Saturday took place as small businesses across the country, from Etsy to ETSY,
Vendors at Camp Toy Stores faced a cash crunch as they could not access their money while banks were closed.

Camp Stores sent a desperate message to customers Asking to use Bankrun as a promo code to buy products because the toy chain needed cash after its funds were temporarily shut down, or worse, in SVB’s collapse. Etsy sellers take on TikTok To express their fear when they were told that the funds would not be transferred to their accounts till Monday at the earliest.

It is spreading to the crypto trading sector as well.

On Saturday, the value of USD Coin USDCUSD,
A cryptocurrency that was supposed to remain equal in value to the US dollar fell amid a selloff on news that Circle Internet Financial, the company behind it, held $3.3 billion in SVB.

Stablecoin USDC falls below $1, $3.3 billion at risk for Silicon Valley banks

Digital currency, known as a stablecoin, is key to crypto trading, a sector that is still recovering from the November collapse of crypto platform FTX.

Separately, the bank’s branches in the UK were closed.

The Bank of England said late Friday it would put the Silicon Valley bank’s UK subsidiary into insolvency process, and that it would stop making payments and accepting deposits.

A version of this report appeared on

Credit: /

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