$42 billion in one day: SVB bank run biggest in more than a decade

At the close of business on March 9, the bank had a negative cash balance of $958 million, according to an order taking possession of the bank filed Friday by California’s bank regulator, the Department of Financial Protection and Innovation.

The order shines light on the scale of the bank run faced by the lender, which was placed into Federal Deposit Insurance Corp. receivership by the state regulator. The scale of attempted withdrawals was so large that the bank ran out of cash and ways to get it.

When the Federal Reserve sent its cash letter — a list of checks and other transactions for the bank to process – to SVB, it failed to pull together enough currency to meet it, according to the California regulator.

“Despite attempts from the bank, with the assistance of regulators, to transfer collateral from various sources, the bank did not meet its cash letter with the Federal Reserve,” the order from Commissioner Clothilde Hewlett said. 

Venture withdrawals

The run was sparked by a letter that Silicon Valley Bank Chief Executive Officer Greg Becker sent to shareholders Wednesday. The bank had suffered a $1.8 billion loss on the sale of US treasuries and mortgage-backed securities and outlined a plan to raise $2.25 billion of capital to shore up its finances. 

Customers immediately tried to pull their money, including many of the venture-capital firms the bank had cultivated over decades. Peter Thiel’s Founders Fund, Coatue Management, Union Square Ventures and Founder Collective all advised their startups to pull their cash from the bank, people familiar with the matter said. 

The withdrawals initiated by depositors and investors amounted to $42 billion on Thursday alone, according to the regulator. Despite being in sound financial condition prior to Thursday, the California watchdog said the run “caused the bank to be incapable of paying its obligations as they come due,” and it was now insolvent.

The bank was then closed by the California DFPI and placed into FDIC receivership, marking the biggest failure of a US bank since the financial crisis.

— With assistance by Steven T. Dennis