On March 10, 2023, the California Department of Financial Protection and Innovation (DFPI) closed Silicon Valley Bank (SVB). Upon closure, the DFPI appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC created the Deposit Insurance National Bank of Santa Clara, which now holds all insured deposits previously held by SVB.
In a joint statement released on March 12, 2023, the Department of the Treasury, FDIC, and Federal Reserve indicated they will make additional funding available to ensure all SVB deposits, both insured and uninsured, will be paid in full. However, the full impact of the receivership’s effect on SVB account holders remains uncertain.
Meanwhile, in the joint statement, the U.S. government regulators announced a similar systemic risk exception for Signature Bank, New York, New York (SNYB), which was closed by its state chartering authority, and relaunched as Signature Bridge Bank. Though many questions remain, we have provided some brief insights on the status of deposits in banks taken over by the FDIC based on currently released information.
The FDIC insures covered deposits (which can include funds in checking accounts, savings accounts, money market accounts, and certificates of deposit) up to $250,000 per depositor. Different legal entities, including affiliate entities, may be considered separate depositors, so long as they engage in “independent activity,” which means the entity must operate primarily for a purpose other than to increase the insurable deposits. On March 12, 2023, the FDIC indicated that all deposits at SVB and SNYB as of that date will be paid in full, whether or not insured. All previous depositors at SNYB will automatically become customers of Signature Bridge Bank.
Depositors may check to see if their accounts are insured and in what amount by visiting the FDIC’s Electronic Deposit Insurance Estimator (EDIE).
As of March 12, 2023, the FDIC has not released any clear claims process for uninsured depositors to follow, but they have indicated that all SVB and SNYB deposits, both insured and uninsured, will be paid in full and available to depositors on March 13, 2023.
According to a joint statement released by the Department of the Treasury, FDIC, and Federal Reserve on March 12, 2023, depositors will have access to all money held in their accounts starting March 13, 2023. (Previously, the amount available on March 13 had been limited to insured deposits only; however, there will now be additional funding available to ensure all SVB and SNYB deposits are paid in full.)
The Federal Deposit Insurance Act does not give the FDIC authority to require that you repay any funds that had been withdrawn prior to a bank’s closure. However, the FDIC may be able to reclaim these funds in the event of a fraudulent transfer. The FDIC may also recover such funds if the individual facilitating the transfer did not have the authority or legal right to do so.
The FDIC expects banking activities to resume no later than March 13, 2023, including online banking and bill pay services. Starting March 13, personal checks from a failed FDIC-controlled institution will continue to clear and debit cards will be fully functional for a limited period of time. The FDIC encourages merchants and others to honor the institution’s checks, as such checks will continue to clear up to the insured available balance until the end of the receivership.
Though all direct deposits will continue for the duration of the receivership, the FDIC recommends that depositors make arrangements to move any automatic payments or withdrawals as soon as possible.
Individuals with currently outstanding loans from SVB or SNYB should continue to make their payments as usual. Under the SVB receivership, the FDIC intends to sell all currently outstanding loans. Before your loan is sold and transferred, you will be notified by mail. You will still have the right to refinance your loan with another financial institution. SNYB borrowers will automatically become customers of Signature Bridge Bank. For additional considerations, please read Loan Facilities From FDIC-Insured Banks in Receivership: Considerations for Borrowers.
All creditors are required to submit claims in writing together with a proof of claim on or before the claims bar date (to be determined). A proof of claim can be filed on Form 7200/19 and must be accompanied by documentation supporting the underlying claim. The FDIC will not accept claims filed on behalf of a proposed class of individuals or entities or a class of individuals or entities certified by a court. Each individual creditor must file a separate claim.
The claim may be submitted electronically through the FDIC website, by fax, or by mail to: 600 N. Pearl St., Suite 700, Dallas, Texas 75201. Claims against SBV should be addressed to FDIC as Receiver for Silicon Valley Bank, and claims against SNYB should be addressed to FDIC as Receiver for Signature Bank.
Please reach out to members of the Bank Receivership Task Force or to your Foley relationship partner if we can provide assistance.