The Federal Deposit Insurance Corp. (FDIC) will hold another auction of Silicon Valley Bank assets after failing to find a buyer over the weekend. According to reports in the Wall Street Journal, regulators have declared the company a threat to the financial system, allowing them to offer more advantageous terms to potential buyers, such as loss-sharing agreements.
Regulators have also announced measures to protect depositors of both Silicon Valley Bank and the now-defunct Signature Bank. "Depositors will have access to all of their money as of Monday, March 13. Any losses associated with the resolution of Silicon Valley Bank will not be borne by the taxpayer," they say in a joint statement.
SVB falls, empire crumbles
As the technology industry expands, a financial collapse occurred at one of the most important banks in the area: Silicon Valley Bank (SVB) and the California financial authorities are closing its doors. The news spread like wildfire, causing great concern among small businesses and investors who have funds locked up in the bank.
But that's not all. Cryptocurrency firm Circle, which held $3.3 billion in SVB, has lost more than 10% of its value. Circle's USDC stablecoin USDC has disintegrated, leading to a domino effect that has affected other stablecoins such as DAI, USDD and FRAX. The cryptocurrency industry has been shaken by the news and many are wondering what the long-term impact will be.
Fortunately, regulators in the US and UK have taken steps to protect depositors and prevent the spread of contagion. U.S. Treasury Secretary Janet Yellen has stated that the Treasury will focus on the needs of depositors and will not bail out the bank. In addition, Bank of London has submitted a formal bid for SVB's UK branch.
For great evils, great remedies
Although no major U.S. financial institution submitted a bid for the bank during the first auction, another institution reportedly submitted a bid. The FDIC has not announced a timetable for the second auction.
On Monday morning, the FDIC named Tim Mayopoulos, former CEO of Fannie Mae, as CEO of Silicon Valley Bank, the part of SVB Financial that was taken over by the banking regulator on Friday. Mayopoulos will take over at a critical time for the company and will work to improve its financial situation.
The second auction is expected to attract a variety of stakeholders, including financial and technology firms in Silicon Valley. The FDIC expects the auction to generate significant interest and to close successfully to safeguard the company's future.
Despite this, the situation remains uncertain and many fear a possible global recession. The financial world remains on alert and only time will tell what the true impact of Silicon Valley Bank's collapse will be.