Regulators dealing with the Silicon Valley Bank's collapse are reportedly planning to give depositors access to 30% to 50% of their uninsured deposits Monday.
The initial payout is aimed at easing distressed customers as regulators race to comb through SVB's assets and uncover a long-term solution, such as a potential sale. Should a long-term solution fail to manifest, regulators are planning to disburse additional money to depositors over time, according to multiple reports.
SILICON VALLEY BANK COLLAPSE: CEO CASHED OUT MILLIONS WHILE EMPLOYEES GOT BONUSES
On Wednesday, SVB triggered panic from venture capital firms when it announced that it sold a litany of securities at a loss. That panic eventually spiraled into a run on that bank, which culminated in its collapse Friday that ushered in a takeover by federal regulators.
SCOOP: Bankers with knowledge of the SVB situation say depositors in the bank are being told they will receive 30% to 50% of their money Monday and most of the rest over time if there is no solution ie complete @FDICgov coverage or sale. We should know what's going down today
— Charles Gasparino (@CGasparino) March 12, 2023
Under Federal Deposit Insurance Corporation policy, bank deposits are insured up to $250,000. However, the vast majority of SVB's deposits were worth more than $250,000, raising concerns about whether investors will be able to retrieve their money.
The FDIC has vowed to make 100% of protected deposits available for Monday. By the end of 2022, SVB amassed over $175 billion in deposits and $209 billion in total assets, Bloomberg reported. The bank stockpiled bonds and Treasuries that shed value when the Federal Reserve began jacking up interest rates.
Over recent months, the tech sector has weathered economic storms, undergone significant belt-tightening measures, and burned through capital after having experienced a boon during the early stages of the COVID-19 pandemic.
Some policymakers have contemplated raising the FDIC deposit insurance threshold in the future to avert a similar predicament down the line. In addition to deposits, SVB also had $62.5 billion in credit commitments at the end of last year, according to the report.
SVB was founded in the 1980s and helped service tech start-ups. It was the 16th-largest federally insured bank in the country and is the largest to falter since Washington Mutual during the 2008 financial crisis.
Treasury Secretary Janet Yellen appeared to rule out a federal bailout for SVB and sought to reassure markets that the banking system remains strong. She left open the possibility of allowing another firm to come in and buy out SVB's assets.
In the weeks leading up to SVB's downturn, CEO Greg Becker cashed out stock options, squeezing out a $2.27 million profit, according to public fillings.
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Multiple lawmakers, such as Sen. Mark Warner (D-VA), have contended that depositors at SVB should get their money back but have not extended the same assertion to its shareholders.
“The shareholders in the bank are going to lose their money, let’s be clear about that. But the depositors can be taken care of,” Warner told ABC on Sunday.