Here’s what could happen next for Silicon Valley Bank’s customers

A customer stands outside a closed Silicon Valley Bank (SVB) headquarters in Santa Clara, California, March 10, 2023.

Justin Sullivan | Getty Images

Silicon Valley Bank customers join investors and bankers around the world in awaiting an announcement from US regulators on what’s next after the biggest banking collapse since 2008.

The Federal Deposit Insurance Corporation (FDIC) said Friday the SVB would reopen Monday morning under the control of the newly created Deposit Insurance National Bank of Santa Clara. Once that happens, insured depositors with up to $250,000 in their accounts will be able to access their funds.

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But most deposits with the SVB were uninsured and it’s unclear when those customers will be able to access their money – or if they’ll get it back in full. SVB’s role as a key bank for start-ups and other venture capital-backed businesses means many companies could struggle to meet payroll and other obligations if their money isn’t recovered quickly.

Many Wall Street and Silicon Valley investors are expecting more information to be released sometime on Sunday. Here’s a look at some of the trails from here.

Regulatory Options

US Treasury Secretary Janet Yellen attends a hearing of the US House of Representatives’ Ways and Means Committee on President Joe Biden’s fiscal year 2024 budget proposal on March 10, 2023 on Capitol Hill in Washington, United States.

Evelyn Hockstein Reuters

One possible option could be to use the FDIC’s systemic risk exemption tool to protect the uninsured deposits with the SVB. Under the Dodd Frank Actthis move would have to be done in coordination with the Secretary of the Treasury and the Federal Reserve.

In addition, Bloomberg News reported on Saturday that regulators are preparing to create a special investment vehicle that would prop up uninsured deposits at other banks, which could prevent the bank run from spreading in the coming week.

Another possibility would be if another bank buys all or part of the SVB. This happened during the financial crisis, including when JPMorgan Chase acquired Washington Mutual in 2008. Bloomberg News reported Sunday that the FDIC is ramping up Auction procedure for the SVB.

Sen. Mark Warner (D-Va.), a member of the Senate Committee on Banking, Housing and Human Affairs, said on ABC’s This Week that “the best outcome is an acquisition of SVB.”

In the past, such acquisitions often took place over weekends. Once the bank opens on Monday, more depositors could withdraw their money, making a sale more difficult.

Sale of FDIC assets

Impact on markets, other banks

Investors have warned that state regulators will not announce a new plan to restore SVB deposits could lead to cascading problems in other small and medium-sized banks and financial markets.

A worrying outcome would be customers withdrawing money in large amounts from other banks and moving it to the largest US banks, which the government has defined as systemically important. Customers have more than withdrawn $42 billion from SVB on Thursday, and similar moves at other banks could weigh on those companies even if they have stronger balance sheets.

This fear could first appear in the financial markets. The US futures market opens at 6pm ET and many Asian markets open around this time.

SVB’s bankruptcy has already had an impact on broader markets. The S&P 500 lost 4.55% last week, while regional bank stocks fell 16% in their worst week since March 2020. Here’s what could happen next for Silicon Valley Bank’s customers

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