Driven by strong deposit growth, Silicon Valley Bank doubled in size in 2021 and primarily invested those deposits in longer-duration U.S. Treasuries and mortgage-backed securities. As interest rates climbed, the securities fell in value, and the bank was forced to sell some at lower prices amid customer withdrawals. Loss-making investment sales triggered more withdrawals by clients of the bank, which catered to technology startups and venture-capital firms. Silicon Valley Bank announced sizable losses on March 8, and its shares subsequently declined rapidly. On March 10, regulators halted trading in shares of SVB Financial Group (ticker: SIVB), the bank’s parent company, and closed the bank to protect depositors.
On March 12, New York-based Signature Bank (ticker: SBNY) was also shut down by regulators and placed into FDIC receivership. Later that day, U.S. Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and Federal Deposit Insurance Corporation Chairman Martin Gruenberg approved actions to enable the FDIC to complete its resolution of Silicon Valley Bank and Signature Bank in a manner that fully protects all depositors, both insured and uninsured.