Regulators in New York state took action to shut down the crypto-focused Signature Bank and Silicon Valley Bank in an attempt to stop the ongoing banking crisis.
The Federal Deposit Insurance Corporation (FDIC) has issued a press release stating, “All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023.” Adding that it, “Will pay uninsured depositors an advance dividend within the next week.”
In addition to getting an advance dividend, uninsured depositors will also, “Receive a receivership certificate for the remaining amount of their uninsured funds,” and that uninsured depositors may receive “future dividend payments” as the FDIC “sells the assets of Silicon Valley Bank.”
“We are also announcing a similar systemic risk exception for Signature Bank, New York,” which was also closed down on Sunday by the city’s Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement Sunday evening.
CNBC reported that the banking regulators will also allow depositors at Signature Bank to fully access their deposits, a similar move to that of Silicon Valley Bank to ensure depositors that they will be getting their money back.
Important lessons
Commenting on the news of Silicon Valley Bank’s collapse, Charles Fletcher, Partner at Mishcon de Reya said, “The collapse of Silicon Valley Bank – and subsequent rescue of the UK arm by HSBC – has important lessons for any start-up.” Adding that, “Emerging tech companies are vital for the nation’s continued economic prosperity.
“We work with businesses from across the emerging company and venture capital community. In our experience, there are simple, practical steps to financial management that businesses can take to minimise the uncertainty and stress many have experienced over the weekend.”
He added that, “Key actions include keeping corporate accounts with more than one bank, having an emergency funding plan to avoid cashflow squeezes, separating funds from different sources and taking a strategic approach to managing currencies. These should accompany fundamental business planning and management steps, such as a detailed risk register and crisis management protocols.”
Significant banking failure
The FDIC made its move days after Silicon Valley Bank’s share price decreased more than 50% after losing $1.8 billion in the sale of U.S. treasuries and mortgage-backed securities it had invested in, according to Tech Crunch.
Shortly after, customers rushed in to withdraw their funds, including founders who were advised by their VCs to withdraw their money or shift away from the bank.
Customers with accounts in excess of $250,000 should contact the FDIC toll–free in the US at 1-866-799-0959. The FDIC as, “Receiver will retain all the assets from Silicon Valley Bank for later disposition. Loan customers should continue to make their payments as usual.”
The US is currently facing a significant banking failure that’s second only to the 2008 financial crisis. We recently reported that crypto bank Silvergate was also set for voluntary liquidation.
Isa Muhammad is a writer and video game journalist covering many aspects of entertainment media including the film industry. He's steadily writing his way to the sharp end of journalism and enjoys staying informed. If he's not reading, playing video games or catching up on his favourite TV series, then he's probably writing about them.
