The Federal Deposit Insurance Corporation (FDIC) recently announced that it has transferred all deposits, both insured and uninsured, and substantially all assets of the former Silicon Valley Bank of Santa Clara, California, to a newly created, full-service FDIC-operated ‘bridge bank’. This action was taken to protect all depositors of Silicon Valley Bank after it was closed by the California Department of Financial Protection and Innovation on March 10, 2023, and the FDIC was appointed receiver.
The transfer of all deposits was completed under the systemic risk exception approved by the FDIC. All depositors of the institution will be made whole, with no losses associated with the resolution of Silicon Valley Bank to be borne by taxpayers. However, shareholders and certain unsecured debt holders will not be protected, and senior management has been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
Depositors will have full access to their money beginning on the day when Silicon Valley Bridge Bank, N.A., the bridge bank, opens and resumes normal banking hours and activities, including online banking. Depositors and borrowers will automatically become customers of Silicon Valley Bridge Bank, N.A. and will have customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before. Silicon Valley Bank’s official checks will continue to clear, and loan customers should continue making loan payments as usual.
The bridge bank structure is designed to “bridge” the gap between the failure of a bank and the time when the FDIC can stabilize the institution and implement an orderly resolution. A bridge bank is a chartered national bank that operates under a board appointed by the FDIC. It assumes the deposits and certain other liabilities and purchases certain assets of a failed bank.
The FDIC named Tim Mayopoulos as CEO of Silicon Valley Bridge Bank, N.A. Mr. Mayopoulos is former president and CEO of the Federal National Mortgage Association and most recently served as president of Blend Labs, Inc. This appointment is expected to help ensure the successful transition of Silicon Valley Bank's operations to the bridge bank.
In conclusion, the FDIC's actions to transfer the deposits and assets of Silicon Valley Bank to a bridge bank were designed to protect depositors and preserve the value of the assets and operations of Silicon Valley Bank. Depositors can rest assured that they will have full access to their funds and that all depositors of the institution will be made whole, while any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. The appointment of a seasoned executive like Tim Mayopoulos as CEO of Silicon Valley Bridge Bank, N.A. is expected to help ensure a successful transition.
