Silicon Valley Bank customers are queuing and fearing for their money

The US money house Silicon Valley Bank (SVB), which specializes in start-up financing, has been temporarily closed and placed under state control after a failed emergency capital increase. This was announced by the US deposit insurance company FDIC on Friday. To protect customers, all of the bank’s insured deposits have been transferred to a new special purpose entity.

Numerous customers queued up to withdraw their money on Friday after the bank’s sudden collapse. Footage posted to Twitter shows customers queuing around the block in the pouring rain outside the entrance of a store in Menlo Park, California. In Manhattan, so many people were queuing that the building manager of the SVB office even called the police, as the “Daily Mail” writes.

Founded in 1982, SVB was the largest bank in Silicon Valley and specialized in lending to early-stage technology companies, providing funding to tens of thousands of early-stage companies. The company’s shares plunged more than 80 percent. The slump was sparked by SVB’s warning that it had suffered a $1.8 billion loss following a distressed sale of a portfolio of assets mostly made up of US Treasuries.

Trading in SVB shares was suspended on Friday as the crisis escalated. The company was reportedly in talks to sell, but chances of a deal quickly faded as customers withdrew their money.

The 17 branches of the bank should reopen on Monday and customers will then have access to this money again at the latest. According to the FDIC, SVB had $209 billion in assets under management and approximately $175.4 billion in deposits at the end of December. It is initially unclear how much of this will be covered by the deposit insurance. For amounts over the $250,000 insurance limit, a full refund is considered in doubt.

Meanwhile, banking expert Reinhard Schmidt considers the shock waves on the international financial markets triggered by the SVB’s difficulties to be exaggerated. He told the German Press Agency that this was a “classic example of an inappropriate panic reaction on the stock markets”.

“The fall in prices was inappropriate because the Silicon Valley Bank is pursuing a very special business model that really bears no resemblance to almost all banks in most countries,” said the economics professor. There is therefore no systemic risk and no reason for further-reaching fears, according to Schmidt.