Silicon Valley Bank’s bankruptcy was the second largest bank failure in U.S. history

The nation’s 16th-largest bank went bankrupt after depositors worried about the bank’s balance sheet – mostly employees of technology and venture capital firms – this week decided to withdraw their money. This is the second largest bank collapse in U.S. history, following the bankruptcy of Washington Mutual at the height of the financial crisis more than a decade ago.

Silicon Valley Bank was very closely tied to the finances of tech companies, and it is unlikely that its problems will spill over to the rest of the banking sector, as happened in the months leading up to the “Great Recession” more than a decade ago. The nation’s largest banks, which are more likely to be the source of systemic economic problems, are now doing fine on their balance sheets and capital.

The nervousness in the banking sector has been there all week, and the Silicon Valley bankruptcy sent stocks of nearly every financial institution down on Friday, which are already down double digits since Monday.

Silicon Valley’s collapse occurred at incredible speed. Some industry analysts were saying as early as Friday that it was a good company and a smart investment. The bank’s management on Friday morning tried to raise capital and find additional investors. However, trading in the bank’s stock was halted before the trading session even started on Wall Street because of extreme volatility.

Shortly before noon, the Federal Deposit Insurance Corporation (FDIC) decided to close the bank. The corporation could not immediately find a buyer for the bank’s assets, a testament to the speed with which depositors withdrew money. The remaining uninsured deposits will be externally managed.

According to the FDIC, the bank had total assets of $209 billion at the time of the bankruptcy. It’s unclear how much of the deposits exceeded the $250,000 insurance limit, but past reports from regulators have shown the proportion was significant.

The FDIC said Friday that deposits not exceeding $250,000 would be available to their holders Monday morning, March 13.

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