US Experiences Second and Third-Largest Banking Collapses In History Over The Weekend

Silicon Valley Bank collapsed on Friday, March 10th, in the second-largest bank failure in US history.

Assets of the 16th largest bank in the nation, which focuses on startups and serves much of the tech industry, were seized by regulators following a run on the bank by its depositors.

The depositors’ rush to withdraw cash came in reaction to the bank’s announcement that they would sell $2.25 billion in shares, after having already sold “$21 billion of securities from its portfolio at a nearly $2 billion loss.”

The FDIC insured Silicon Valley Bank depositors for up to $250,000 in the event of a collapse. However, as many SVB customers were a mix of large and small tech, as well as media, companies, and venture capitalists, much of their deposits were well over this amount. In fact, at the end of last year, 89% of the bank’s $175 billion in deposits were uninsured.

This caused uncertainty over the weekend as those with deposits over this amount were initially left unsure of their futures. The FDIC eventually said that they would safeguard all deposits of SVB including those over the typical cap, easing some of the anxiety associated with this situation.

Despite the steps taken by the FDIC, and insistence on the strength of the banking system by President Joe Biden and other key officials, among others, worry persisted.

These fears were enough to lead to the third-largest banking collapse in U.S. history, of New York-based Signature Bank which regulators seized on Sunday, March 12th, just two days after SVB’s collapse. Similar to SVB, Signature Bank’s collapse was mainly due to a run by depositors, who withdrew over $10 billion in deposits on Friday.

The FDIC is extending their unprecedented move to safeguard above the usual $250,000 limit to Signature Bank customers as well, saying they will have access to all of their deposits regardless of amount.

Looking ahead, the FDIC continues to search for buyers for each U.S.-based bank. In Europe, HSBC bought the UK division of SVB for £1, or $1.20, allowing it to immediately acquire the division and secure the deposits of UK customers. However no news has come out on the likelihood of its U.S. counterpart or Signature Bank to find a buyer in time to avoid bankruptcy.

Further reports reveal that North Carolina had some direct ties to these banks. Not only does SVB have a branch on Glenwood Avenue in Raleigh, but the states’ retirement fund was a shareholder of both banks’ stock as well. 

State Treasurer Dale Folwell says the fund has “small exposures” to the bank failures, indicating that the fund had approximately “$9.9 million of Silicon Valley Bank stock as well as approximately $7.8 million of Signature Bank stock” across three of their portfolios. However, he said this makes up “less than 0.01%” of these portfolios’ values, and that the states’ treasurer office is “very pleased” their exposure was as small as it is.

Originally Published 3/15/2023

Updated: 3/23/2023