Silicon Valley Bank

Silicon Valley Bank (SVB) was a commercial bank headquartered

in Santa Clara, California. SVB was the 16th-largest bank in the
Silicon Valley Bank
United States at the time of its failure on March 10, 2023, and was
the largest bank by deposits in Silicon Valley.[4] It was a subsidiary
of the bank holding company SVB Financial Group.[3] As a state-
chartered bank, it was regulated by the California Department of
Financial Protection and Innovation (DFPI) and was a member of
the Federal Reserve System.[5] The bank operated from offices in
13 countries and regions.[3][6][7]

On March 10, 2023, it failed after a bank run on its deposits. The
DFPI revoked its charter and transferred the business into Headquarters in Santa Clara
receivership under the Federal Deposit Insurance Corporation Financial services
Industry
(FDIC) in the second-largest bank failure in U.S. history.[8] Its
insured deposits were moved to a new bank created by the FDIC, Founded October 17, 1983[1]
called the Deposit Insurance National Bank of Santa Clara, Founders Bill Biggerstaff
operating from SVB's former offices. December 2022 regulatory Robert Medearis
filings estimated that more than 85% of deposits were uninsured,[9]
Roger Smith[2]
and the FDIC said it would begin covering those deposits with
special dividends within days as SVB's assets were liquidated. On Defunct March 10, 2023
March 12, 2023, a joint statement by Secretary of the Treasury Fate Failed after a bank
Janet L. Yellen, Federal Reserve Chairman Jerome H. Powell, and run on its deposits
FDIC Chairman Martin J. Gruenberg stated that all depositors at and taken into
SVB would be fully protected and have access to all of their receivership by the
money starting the following Monday, March 13.[10][11][12][13] Federal Deposit
Insurance
History Corporation
Successor Deposit Insurance
National Bank of
Initial years (1983–1994) Santa Clara
Headquarters Santa Clara,
Silicon Valley Bank was founded by former Bank of America California, U.S.
managers Bill Biggerstaff, Robert Medearis, and Roger Smith, Key people Gregory W. Becker
who came up with the idea over a game of poker. It launched on
(former CEO)
October 17, 1983, as a wholly-owned subsidiary of Silicon Valley
Bancshares (now SVB Financial Group) with 100 initial Roger F. Dunbar
(former Chairman)
investors.[1][2][14] Its first office was located on North First Street
in San Jose.[15] Michael R.
Descheneaux
In 1986, SVB and National InterCity Bancorp merged, and an (former President)
office was opened in Santa Clara.[16] It opened its first office on Parent SVB Financial
the east coast in 1990, near Boston, to serve the Massachusetts Group 
Route 128 tech corridor. Tier 1 15.26%
Capital ratio
(2022)
The bank did a substantial real estate loan business in its early Website svb.com (http://sv
years, making up 50% of its portfolio in the early 1990s. A slump b.com)
in the California real estate market resulted in a $2.2  million loss Footnotes / references
for the bank in 1992, and by 1995 the portfolio percentage had [3]
fallen to 10%. In 1993, John C. Dean was appointed CEO, with
founding CEO Roger V. Smith becoming Vice Chairman.[17][18] The bank added a winery lending
business in 1994.[19]

Expansion (1995–2022)

The wave of computer technology startups during the dot-com

bubble provided an influx of business for the bank, which was
noted for its willingness to lend to venture-stage companies that
were not yet profitable. Among its approximately 2,000 clients in
1995 were networking innovators Cisco Systems and Bay
Networks.[17] That year, the bank moved its headquarters from San
Jose to Santa Clara.[17] The holding company's stock price soared
through the bubble but fell 50% when the bubble burst.[20] The Silicon Valley Bank in Tempe,
bank continued to add branches in technology hubs across the Arizona
country.[3][21] Ken Wilcox became CEO in 2000[22] and chose to
continue the company's niche focus on technology companies
rather than diversifying into a broader commercial bank.[21]

SVB formally entered the private banking business in 2002, building on prior experience and relationships
with wealthy venture capitalists and entrepreneurs.[23] In 2003, the bank sponsored three high-profile
international trade missions to Bangalore and Mumbai, Tel Aviv, and Shanghai and Beijing, bringing along
a delegation of two dozen Silicon Valley venture capitalists along to meet with local investors,
entrepreneurs, and government officials, as a prelude to opening international offices.[2][24] It announced an
international expansion drive in 2004, with new operations in Bangalore, London, Beijing, and Israel.[21]

During the 2007–2008 financial crisis, SVB Financial Group received a $235 million investment from the
federal government in exchange for preferred stock and warrants under the Troubled Asset Relief Program
(TARP).[25] Over two years, it paid $10 million in dividends to the U.S. Treasury, then used the proceeds
of a $300  million stock sale to buy back the government's interest.[26] Greg Becker replaced Wilcox as
CEO in April 2011.[22]

SVB partnered with Shanghai Pudong Development Bank (SPDB) in 2012 to create a separate Shanghai-
based bank to lend to local technology startups.[27] The new bank, owned 50–50 by the two companies,
received approval from Chinese bank regulators to operate in renminbi (RMB), making it one of a handful
of American-owned banks permitted to do so.[28] SVB also managed two local yuan-denominated funds
for Shanghai's Yangpu District government, and invested in a Hangzhou-based loan guarantee company.[29]

In 2015, the bank stated that it served 65% of all U.S. startups. Its new offerings at the time included
syndicated loans and foreign currency management, and it stood out as the only U.S. financial institution
then working with virtual currency startups.[20] SVB was the finance partner during the launch of Stripe's
Atlas platform in February 2016 to help startups register as U.S. corporations.[30]

Collapse
In 2022, SVB began to incur steep losses following increased interest
rates and a major downturn in growth in the tech industry, where the
bank's liabilities were heavily concentrated.[31][32] As of December 31,
2022, SVB had mark-to-market accounting unrealized losses in excess of
$15 billion for securities held to maturity.[31] In early March of 2023, a
combination of factors—including poor risk management and a bank run The FDIC created a new
driven by tech industry investors—caused the bank to collapse.[33][34] bank, the Deposit Insurance
National Bank of Santa Clara,
Examiners from the Federal Reserve and the FDIC arrived at the offices to service SVB's insured
of SVB early in the morning of March 10 to assess the company's deposits.
finances.[35] Several hours later, the California Department of Financial
Protection and Innovation (DFPI) issued an order taking possession of
SVB,[36] citing inadequate liquidity and insolvency,[37] and appointed the FDIC as receiver.[38][39] The
FDIC then established a deposit insurance national bank, the Deposit Insurance National Bank of Santa
Clara, to re-open the bank's branches the following Monday and enable access to insured
deposits.[8][40][41][42] According to Reuters, after the SVB was closed by regulators, the CEO of Silicon
Valley Bank, Greg Becker, who was previously on the board of directors at the Federal Reserve Bank of
San Francisco, exited that position.[43] The failure of SVB was the largest of any bank since the 2007–2008
financial crisis by assets, and the second-largest in U.S. history behind that of Washington Mutual.[44]
SVB's Chinese joint venture, whose chairman is the chairman of Shanghai Pudong Development Bank,
said their operations were "sound" as of March 11, 2023.[29] The UK Government announced that they
were working on a lifeline for British tech firms affected by the collapse of the Bank and their branch in the
United Kingdom as a part of the fallout from the parent bank.[45]

Business model
When Silicon Valley Bank was founded, the banking industry did not understand startup companies well.
Silicon Valley Bank structured its loans with the understanding that startups do not earn revenue
immediately, managing risk based on their business model.[2] The bank connected customers to its
extensive venture capital, law, and accounting firm network.[46] Its main strategy was collecting deposits
from businesses financed through venture capital. It then expanded into banking and financing venture
capitalists, adding services to allow the bank to keep clients as they matured from their startup phase.[47]
Initially, startup founders seeking loans from the bank had to pledge about half of their shares as collateral,
but the rate later fell to about seven percent, reflecting a low failure rate and founders' tendency to pay off
the loans to stay in control of the company. The bank covered losses by selling the shares to interested
investors.[48]

The bank's customers were primarily businesses and wealthy individuals in the technology, life
science/healthcare, private equity/venture capital and premium wine industries.[3][49][50] It was influential
among startups in India, being unusually willing to serve C corporations whose founders lacked Social
Security numbers.[51]

As of December 31, 2022, 56% of its loan portfolio were loans to venture capital firms and private equity
firms, secured by their limited partner commitments and used to make investments in private companies,
14% of its loans were mortgages to high-net-worth individuals, and 24% of its loans were to technology
and health care companies, including 9% of all loans which were to early and growth-stage startup
companies.[16] Silicon Valley Bank required an exclusive relationship of those borrowing from the
bank.[52]

Operations
The bank operated from offices in Canada (Toronto), the Cayman Islands (Grand Cayman), China (Beijing,
Shanghai, Shenzhen), Hong Kong, India (Bangalore), Ireland, Israel (Tel Aviv), Sweden (Stockholm), the
United Kingdom, the United States, Denmark (Copenhagen), Germany (Frankfurt) and other countries of
the European Union.[3][53][54]

The bank's 160,000-square-foot (15,000 m2 ) headquarters in Santa Clara, California, which also serves as
headquarters for the holding company, has been the longtime anchor tenant of a seven-building office
complex called The Quad at Tasman. The bank's lease was scheduled to expire on September 30, 2024. It
also operated 55 offices, including 17 branches across the United States. Overall, in 2022, the company had
$101 million in net occupancy costs for its various office leases through 2057. If the FDIC cannot find a
buyer for the bank's assets, federal law allows it to negate these leases.[55]

Though banking is a high-tech sector, the bank was criticized for having old technology and lacking
biometric authentication.[56]

Affiliations and sponsorships

Silicon Valley Bank was a member of the Federal Reserve System, with the bank's CEO serving as a class
A member of the Federal Reserve Bank of San Francisco Board of Directors.[57] It was also a member of
several trade associations: TechNet, the Silicon Valley Leadership Group, the Bay Area Council,
Tech:NYC, the Mid-Size Bank Coalition of America, and the American Bankers Association.[58] As part of
its foray into India, it partnered with the non-profit mentoring organization TiE beginning in the late
1990s.[24]

Silicon Valley Bank sponsored EF Education–Tibco–SVB, a women's professional cycling team, beginning
in 2007, becoming a co-title sponsor in 2015.[59]

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Further reading
Saxenian, AnnaLee (2006). The New Argonauts: Regional Advantage in a Global Economy
(https://books.google.com/books?id=djgO_Thn6dUC&pg=PA82). Cambridge,
 Massachusetts: Harvard University Press. ISBN 978-0-674-02566-0 – via Google Books.

External links
Official website (https://www.svb.com/)
Silicon Valley Bank (https://web.archive.org/web/20230310044142/https://www.svb.com/) at
the Wayback Machine (archived March 10, 2023), before the FDIC takeover

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