The Federal Deposit Insurance Corporation (FDIC) has taken action to protect depositors of Silicon Valley Bank of Santa Clara, California, by transferring all deposits, both insured and uninsured, and substantially all assets of the bank to a newly created, full-service FDIC-operated ‘bridge bank’ on Monday.

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The move was made after the California Department of Financial Protection and Innovation closed Silicon Valley Bank on Friday, March 10, 2023, and the FDIC was appointed as receiver.

"Depositors will have full access to their money beginning this morning, when Silicon Valley Bank, N.A., the bridge bank, opens and resumes normal banking hours and activities, including online banking," FDIC said in a statement.

This morning, we acted to protect all depositors of the former #SiliconValleyBank of Santa Clara, California. This action will help preserve franchise value for marketing and sale of the closed institution without cost to the taxpayer. https://t.co/y8toHHw8rh pic.twitter.com/uvpLMuONyq

— FDIC (@FDICgov) March 13, 2023

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Depositors and borrowers will automatically become customers of Silicon Valley 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.

"Loan customers should continue making loan payments as usual. Silicon Valley Bank’s official checks will continue to clear," FDIC infomed.

The transfer of all deposits for SVB was completed under the systemic risk exception on Sunday. It also noted that no losses associated with the resolution of the bank will be borne by taxpayers. However, shareholders and certain unsecured debt holders will not be protected, and senior management has been removed.

To ensure that losses to the Deposit Insurance Fund are recovered, a special assessment will be made on banks as required by law, the insurance corporation said.

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Additionally, all Qualified Financial Contracts of the failed bank have been transferred to the bridge bank.

A bridge bank is a type of national bank that operates under the supervision of a board appointed by the FDIC. It assumes the deposits and certain other liabilities and purchases certain assets of a failed bank. The bridge bank structure is designed to "bridge" the gap between the failure of a bank and the time when the FDIC can stabilise the institution and implement an orderly resolution.

The FDIC has appointed Tim Mayopoulos, former president and CEO of the Federal National Mortgage Association and president of Blend Labs, Inc., as the CEO of Silicon Valley Bank, N.A.

Also read: HSBC unit buys Silicon Valley Bank UK for £1 to protect deposits

First Published:Mar 13, 2023 4:42 PM IST